In a 2001 article in the New Oxford Review , Michael Naughton examines the spectacular rise of executive salaries in large publicly traded companies in the light of Catholic social teaching. He notes that the key issue is a change of ownership and an accompanying change in the dynamics of power in large companies. He quotes Peter Drucker: “a change in property ownership always results in a change in power. We’ve had a change in property with the emergence of institutional investors. That is a change in power.”

The change in ownership that has occurred in the past two decades is from individual to institutional investors: “individual investors have given way to large groups of investors clustered into institutionally managed investment plans — mutual funds, pension funds, 401(k) plans, IRAs, insurance companies, etc.” Institutional investment managers want to maximize dividends for their investors, and they pressure executives to make that their over-arching goal: “Through the sheer size of their portfolios, these institutional investors have exerted a tremendous influence on executives at publicly traded companies. Executives charged with the management of such voluminous, clustered investment capital feel the pressure of institutional stockholders who mark success by maximizing returns for their clients.” Naughton observes, “In defending his $170 million in total pay for 1999, the CEO of Tyco, L. Dennis Kozlowski, argued, ‘the way I calculate it, while I gained $139 million [in options], I created about $37 billion in wealth for our shareholders.’” He was a successful executive because he maximized profits for shareholders.

Naughton argues that this shift in power has distorted the work of executives and laborers at large companies.

According to Catholic social teaching, executives should be “distributors of justice, agents to the common good, collaborators with God — that is, people with a vocation.” They are responsible not just to maximize profits, but to manage people justly and do good for the people they are responsible for. That must include the workers who actually produce the goods that a company sells. Naughton comments sardonically on Kozlowski’s boast about the success of his management of Tyco: “One wonders what the other employees at Tyco did to increase company wealth, and how they felt when they read Kozlowski’s words.” Staggering financial incentives to shape a company toward the interests of institutional stockholders undermine the executive’s vocation to serve as an agent of justice.

The same pressures make it difficult to create a “community of work.” As Naughton says, “Current ownership patterns of publicly traded companies foster only one relationship between stockholder and company: stock price. This leads to a disconnected relationship between property holders (stockholders), on the one hand, and labor and the communities in which the property resides, on the other hand. The market’s relentless pressure for maximum investor returns leads corporations to unleash what The Wall Street Journal has called the ‘four horsemen of the workplace’: (1) downsizing; (2) moving operations to low-wage countries; (3) increased automation; and (4) the use of temporary workers. These horsemen can be legitimately used to meet unusual economic, productive, and even political challenges to any firm, but to use them as ordinary business practice undermines any attempt to build a community at work and a workplace presence in the community. Nevertheless, they have become staples of ‘disconnected’ capital’s search for ever-increasing returns, regardless of the social effects.” According to Catholic social teaching, work is a social activity, but the sociality of work gets fragmented when laborers are scattered all over the globe.

Naughton points to examples of companies that resist these pressures (e.g., Herman Miller, an office furniture manufacturer), but he recognizes that the problem is at bottom a spiritual one: “Only a spirituality of work that reminds us daily of why we are here and where we should hope to be going will have the capacity to help executives, and us, to see the vocational calling of work.”