The Magazine of the Jewish Association for Business Ethics

The bonuses and large salaries

of senior corporate executives

have recently become matters of

considerable controversy,

exacerbated by the general

pressures of the recession and

by the sudden instability in the

banking sector in particular.

There are no specific rules to be

found in classic halachic

literature about either of these

matters, but as always it is

possible to distill guidance from

Torah sources.

The obvious starting point is the

mitzvot which prohibit the exploitation

of positions of commercial power. In

modern parlance in the context of

competition law, we talk of the abuse

of a dominant market position: that

concept is a powerful force in the

Jewish commercial code of ethics.

The prohibition of "Ona'ah" -

overcharging - has no direct

application to executives salaries, the

halachah expressly recognising that

personal services have no exact

market value; but it establishes a

general principle, that one should not

seek to profit more than is generally

accepted as reasonable. The

problem is that the salaries of senior

executives have developed more or

less in parallel so that one can say

both that there is a roughly

observable parity of market practice

amongst the leaders of the largest

businesses, but also that it does not

command general respect or

acceptance from those who do not

share in it.

Amongst the mitzvot about abuse of

commercial power are specific

prohibitions against exploiting the

vulnerable: widows and orphans are

singled out in a number of places

[see, Exodus 22:22]. The Torah does

not content itself with prohibiting their

oppression, but describes the

consequences of failure to protect in

emotive terms: "when they cry to me

I will certainly hear their cry, my anger

will be aroused and I will destroy you

and reduce your own wives to

widowhood and your children to

orphans". The Torah is dealing here

with general oppression of a kind that

breaches no laws and therefore

cannot be resolved by a court. But it

still results in injustice and, says the

Torah, we should remember that what

the courts cannot deal with, God will,

in His own inscrutable way.

Social commentators from Dickens

and Trollope onwards have noted

how the expansion of commercial

opportunity through the development

of corporate institutions has delivered

the financial fortunes of widows and

orphans into the hands of the large

financiers, whose success and failure

determine those of their millions of

clients, nowadays through the

unavoidable complexities of unit

trusts and pension funds.

Entrepreneurs in charge of large

funds and businesses should

remember their social responsibility. It

could be argued that a commercial

climate that appears to reward failure,

or at least omits to punish it, by

allowing large bonuses for executives

who preside over corporate disasters

that ruin the most vulnerable of their

clients, creates the very injustice

against which the Torah protests, and

of the potential consequences of

which it warns in such graphic terms.

This article was prepared with the

assistance of Daniel Greenberg, Barrister

and JABE Consultant

Jewish Concepts - Ona’ah“When you make a sale to your

fellow or make a purchase from the

hand of your fellow, do not aggrieve

one another.” [Leviticus 25:14]. With

this verse, the Torah forbids a seller

to overcharge and a buyer to

underpay in the course of a

business transaction. This is known

as the prohibition of ona’ah, taking

advantage.

The Gemara (Bava Metziah 61a)

compares the prohibition of ona’ah

to outright stealing, for in both

cases a person is taking money or

possessions that are not rightfully

theirs.

Corporate Bonuses

Summer 2009

It has not been a good few days

for the Home Secretary Jacqui

Smith.

She is currently being

investigated because of

complaints about her decision to

elect a room in her sister's house

in south London, where she

stays when in London, as her

"main" home rather than her

house in her Redditch

constituency.

The conclusion drawn by many is that

this was done deliberately to allow

her to claim back the considerable

costs of running her family home in

Redditch.

She has also had to apologise for

claiming the cost of adult movies on

her parliamentary expenses.

The implication is that she may have

manipulated the rules for her own

benefit; at worst, she may have

wrongly claimed personal spending

against her parliamentary expenses;

at best, she has tarnished her

reputation by appearing to do so.

Some principles in Judaism might

help to decide the best course of

action to take in this situation.

According to Judaism, an employee

is not allowed to use their employer's

resources for their own needs. They

are also not allowed to take on extra

work if this means they will be unable

to perform their regular work properly.

An employee is required to arrive to

work on time, and be able to work

their full shift.

In line with this, it might be argued

that, according to Judaism, it is

reasonable for MPs to have second

homes near the Palace of

Westminster to allow them to avoid

lengthy travel between their

constituencies and London.

It could also be argued that making

people work gratuitous hours could

be defined as a kind of unseemly

domination by the employer which

Jewish law forbids.

However, helping oneself to the

employer's property without

permission - such as free phone

calls, paper clips or rides in the

corporate jet - is prohibited.

The Torah [Deuteronomy 23:26-27]

states: "When you come into your

neighbour's vineyard, you may eat as

many grapes as you desire, to your

fill, but you may not put any into a

container." These laws ensured that a

worker had a right to eat a

reasonable amount of the crop while

harvesting, but not to carry away

large amounts to sell or give to

others.

The Rambam [Maimonides]

cautioned that the Torah only grants

the right to eat one's fill, not to take

produce with you or to eat like a

glutton; this would be considered

theft. The same principle could be

applied to 'inflated' expense claims.

This case raises another interesting

issue: the importance of those in

public positions remaining above

reproach .

"And you shall be guiltless before the

Lord and before Israel." [Numbers

32:22]. This principle has been used

in Judaism over the years to highlight

how those in positions of trust must

endeavour to remain above

suspicion.

In Talmudic times, those whose duty

it was to collect charity, were

prohibited from exchanging copper

coins which they had collected with

their own silver coins in case others

might see this as suspicious.

Similarly, the Turei Zahav [Rabbi

David HaLevi Segal, 1586-1667] a

prominent halakhic authority and

commentator on the Shulchan Aruch

[Codification of Jewish Law],

stipulated that charities should have

more than one person in charge of

managing funds to avoid mistakes

being made and to counter claims of

possible suspicion of wrongdoing.

The principle of "And you shall be

guiltless" finds easy application in the

modern world. For example. a

manager in a company might be in a

position to secure reimbursement of

business expenses without receipts

but this principle would require them

to submit the appropriate

documentation in order to avoid

suspicion.

As Jews, we are all, whatever our

occupation or position, required to act

within the parameters set out in

Jewish law as well as those set out

by legislators i.e. according to Dina

D'Malchuta [the law of the land]. In

addition, Judaism recognises the

importance and the need for all,

especially public servants, to be

perceived as trustworthy. This affords

them the ability to perform their duties

effectively.

Those in such positions need to go

that one step further, beyond the

letter of the law, [Lifnim Mishurat

Hadin] and to try and remain above

reproach, in order to protect their

most important resource, their good

name. As it states in Kohelet

[Ecclesiastes 7:1] "A good name is

better than precious oil". As Rashi

comments: Fine oils are for the

moment, a good name is forever.

The real cost of an expense claim

JABE T: 020 8905 4048 E: info@jabe.org W: www.jabe.org

The Home Secretary under fire

Woolworths' administrator Neville

Kahn (Senior Insolvency Partner

at Deloitte) and serial entrepreneur

Simon Bentley (Deputy Chairman,

Mishcon de Reya and Chairman

of Sports Direct International plc)

locked horns with the audience at

a packed room at an absorbing

JABE seminar which focussed on

some of the ethical issues relating

to a recession.

Chaired by Maurice Moses (JABE

chairman and partner at Ernst &

Young) and hosted by Davenport

Lyons, the event provided a platform

for over 85 business people and

professionals to openly and frankly

discuss the issues thrown up by the

current economic climate.

Debating the hot topic of government

bail-outs, the panel were of the

opinion that the government had very

little choice in bailing out the banks.

Insolvency expert Neville Kahn

likened the banks to the plumbing in

one's home "we all need heating and

running water."

The expert panel were very vocal

when tackling the reasons why the

banks got into trouble in the first

place. Dayan Abraham (JABE

consultant and member of the

London Beth Din) stressed the need

for individuals to take responsibility

and to not hide behind the corporate

veil. "The Business world and the

moral world cannot be separated. To

forget one whilst practising the other

is being derelict in one's duty"

Maurice Moses, also an insolvency

practitioner, probed the panellists on

other very topical and contentious

issues such as pre-pack

administrations and the difficult issue

of what happens when a family

business goes under - does one put

the family before creditors?.

The bottom line for serial

entrepreneur Simon Bentley was that

"there are those who are ethical and

those who are not, irrelevant of

recession" and those with ethics will

always strive to do the right thing.

When challenged about the ethical

issues posed by redundancy and

cutbacks, the panel agreed that the

important thing was to do what was

best for the business. They felt that

this would benefit society in the long

run and help steer businesses back

on the right course sooner rather

than later. However, where

redundancies are unavoidable, it is

important to treat staff with dignity

and ensure they receive their

entitlements.

Maurice Moses, stated that justifying

the huge bonuses paid to investment

bankers as enabling the bank to

retain its key employees, was a fairy

tale world in the minds of the board of

management "bonuses were

unnecessary and inappropriate given

the current situation we all find

ourselves in."

In summing up Dayan Abraham

suggested that "ethical behaviour

may well be the key to getting us out

of the recession." He impressed on

the audience the importance of

Sanctifying God's name (Kiddush

Hashem) in everything we do and

that means acting properly and being

seen to act properly at all times.

As a last thought, the Dayan stressed

the need for all of us to continue to

act generously towards charitable

causes even in these difficult

financial times.

This article is based on a recent

JABE seminar hosted by

Davenport Lyons.

JABE T: 020 8905 4048 E: info@jabe.org W: www.jabe.org

Ethics in a

RecessionMake Sure

Yours Survive?

“The Business world

and the moral world

cannot be separated.

To forget one whilst

practising the other is

being derelict in

one's duty”

JABE T: 020 8905 4048 E: info@jabe.org W: www.jabe.org

Property Boom & Bust: Do Ethics Change?A Report from JABE’s Annual Dinner & Seminar

Can we afford to remain ethical in

this era of financial turmoil? This

dilemma was at the heart of the

JABE’s Annual Dinner & Seminar:

Property Boom and Bust, Do Ethics

Change? held at London's Park

Lane Hotel. Over 250 of the City's

leading movers and shakers were

warmly welcomed by JABE's vice-

president Sir Trevor Chinn detailed

the consistent and growing success

of JABE's work, within schools and

the corporate sector to the packed

room.

The guests listened intently to the

views of the high-profile panel

consisting of Lord Paul Myners,

Gerald Ronson, Nick Leslau and

Rabbi Shlomo Levin. Broadcaster

and journalist Andrew Neil

interviewed the panel in his own

inimitable style, engaging the panel

and guests in a lively debate on the

issues facing the property industry in

the current financial climate.

Neil pointed out that "the real test is

how you behave when things aren't

so good." Nick Leslau insisted that

the current situation presents

enormous commercial and ethical

challenges: "The 'law of the jungle'

places moral stress on bankers,

borrowers and professionals alike.

It's easy to say 'I'm going to be

completely ethical', but what's really

going to happen over the next five

years?"

Rabbi Shlomo Levin outlined the

Jewish perspective stressing that

"ethical behaviour cannot be

discarded in difficult times. People

must take into consideration whether

their actions will have a good effect

on society as a whole rather than

being advantageous purely to

themselves."

Ethical conduct is its own reward,

Lord Myners said. It was in the

enlightened self-interest of banks to

behave responsibly, "because as a

bank, if you don't lend, you will do

yourself damage."

In response to Andrew Neil's view

that "the behaviour of the banks not

only nearly caused their own demise

but nearly brought down the whole

capitalist system", Nick Leslau

claimed the blame ought to be

shared; "We didn't have to take the

money from the banks. We could talk

about reckless borrowing as well as

reckless lending. People were

constantly refinancing, treating their

homes like ATMs. If our parents and

grandparents couldn't afford

something, they didn't buy it."

Property developer Gerald Ronson

reasoned that whilst a large number

of unscrupulous people had entered

the property sector over the last few

years, he hoped the current climate

would mean that "the duckers and

the divers will be out".

The consensus among the panel was

that, as Andrew Neil put it, "ethical

behaviour should be part of practical

reality, not just a distant ideal." Lord

Myners was full of praise for JABE's

programmes and activities,

highlighting that "good ethics are an

essential part of business".

JABE introduced its new initiative

Good Business Practice at the event,

which will provide corporations with

Principles for the Ethical Conduct of

Business that will become part of

their values and culture.

Guests on the evening included

many well know personalities from

the property sector, including Richard

Loftus, Manny Davidson and Michael

Heller.

“People must take

into consideration

whether their actions

will have a good

effect on society as a

whole rather than

being advantageous

purely to themselves”

The Panel (l-r): Rabbi Shlomo Levin, Gerald Ronson, Andrew Neil, Lord Myners

and Nick Leslau

L-R: Sir Trevor Chinn (Vice President

of JABE) with Lord Myners

JABE T: 020 8905 4048 Email: info@jabe.org www.jabe.org

Opened in September 2006,

Westminster Academy

experienced its first ‘Money &

Morals’ Roadshow in March

2009.

The 'Money & Morals' Schools

Roadshow visit schools as diverse

as Eton, King Solomon High School,

City of London, Westminster

Academy and Christ's College. The

Roadshow involves professional

actors, role playing dilemmas,

together with leading members of the

business world who encourage the

students to engage in ethical

discussions and to identify with role

models.

After the lively Roadshow, Andrew

Myers (Chief Executive, Enable

Limited), one of the Roadshows’

business speakers said “I have now

been the business speaker at 4

roadshows both at private and state

schools and this was without a doubt

the most fulfilling and energizing of

any that I have attended. In a school,

primarily of Muslim and Black pupils

with little understanding or empathy

of the jewish community, the work of

JABE and its Money and Morals

roadshow cannot be understated.

The level of interaction between

Rabbi Roberts and the students was

fascinating to watch and it was clear

that the students found their views

and ideas challenged and were

willing to challenge each other...

I probably found it as stimulating as

the students did and shows that brick

by brick it is possible to have a

positive influence on the future

generations both in business terms

and also in their views and

perceptions of Jews and the Jewish

community.”

For further information on the

‘Money & Morals’ Programme

contact Gideon on 020 8905 4048

“Fulfilling & Energizing”: The ‘Money &

Morals’ Roadshow visits Westminster

Academy for the first time.

Rabbi Dovid Roberts discusses the issues at hand with pupils from Westminster

Academy

Don’t miss this

fascinating

interactive

seminar.

To Book visit

www.jabe.org

or call 020 8905

4048

Published by © Jewish Association for Business Ethics 2009

2nd Floor, Mowbray House, 58-70 Edgware Way, Edgware, Middx. HA8 8DJ

T: 020 8905 4048 F: 020 8905 4658 E: info@jabe.org W: www.jabe.org

Spending in a Recession A JABE Perspective

The idea that the United

Kingdom might spend itself out

of a recession raises a number

of issues in Jewish thought.

It has always been a distinguishing

mark of the righteous person in

Jewish thought that he or she is

careful with their money and other

possessions (Chullin 91a), treating

them as blessings provided by God

for the purpose of enabling us to play

a part in perfecting the world, and not

to be squandered thoughtlessly for

the purposes of trivial gratification.

Rabbeinu Bachaye recognises how

God created the world in such a way

as to ensure that one's basic needs

could be catered for easily. The more

essential a commodity is e.g. air,

water and food, the more abundantly

it can be found.

The pointlessness and dangers of

amassing large quantities of material

possessions purely for the sake of it

are powerfully captured by the

Rabbis in the epigram "the more

possessions, the more worry" [Pirkei

Avot 2:8]. So, even with the money

that people have, the Torah

encourages them to spend carefully

and sensibly.

Encouraging people to buy things

that they do not really need is

contrary to our general approach to

the material world. For a trader to lure

someone into debt that he or she

may find difficult to service is a clear

case of the prohibition of lifnei iver

'putting a stumbling block in the way

of the blind'. The use of marketing

techniques of the "Buy Now, Pay

Later" variety, designed to encourage

me to spend recklessly falls into this

category.

However, consumers also have a

responsibility, to stop and think

carefully whether or not they need the

item enough for it to be worth

incurring a debt that may take years

to clear or, indeed, whether they have

a realistic chance of ever being able

to clear the debt at all.

Jewish thought is strongly supportive

of all kinds of commercial activity,

including the idea of stimulating

enterprise through the provision of

capital. Even lending becomes not a

snare but a positive mitzvah when it

is designed to facilitate someone

else's ability to earn a self-sufficient

livelihood. The concept used to

make interest-free lending

compatible with the modern context

in which foregoing interest equates to

losing money is the concept of the

"heter iska", which amounts to a

business partnership: one person

becomes a sleeping partner whose

interest is largely confined to having

provided capital, while the active

partner is thus enabled to use his or

her business skills to make money for

both parties.

In summary, it could be said that

Judaism favours commercial

creativity and genuine economic

stimulation in order to provide for

one's needs, but is cautious of

encouraging people to spend money,

or, worse, to get into debt, simply for

the sake of it.

This article was prepared with the

assistance of Daniel Greenberg, Barrister

and JABE Consultant

“Encouraging people

to buy things that

they do not really

need is contrary to

our general approach

to the material world”