Should You or Shouldn’t You Accept a Pay Raise?

4.1 Should You or Shouldn’t You Accept a Pay Raise?

Controversies: 3.16, 3.20 Key Words: equity, fairness, city manager Case Complexity → Low CD: 4.32 Leading with Integrity

You are the city manager of a bustling, growing city of 128,000 that is ranked 27th in Money Magazine’s 2006 list of 100 Best Places to Live. In fact, your community is the highest ranked in your state. The crime rate is low, with a city index indicat- ing that your city is the 23rd safest in the United States. The city’s credit rating is a healthy AAA, which enables funds for capital projects to be borrowed at the lowest possible interest rate. The city is working towards becoming one of the few cities in the nation to be recognized as a Community Wildlife Habitat by the National Wildlife Federation (NWF).

Encouraging Ethical Behavior ◾ 81

You have been the city manager for more than ten years and draw a base salary of $197,000. You also receive a $7,000 vehicle allowance and a cell phone with all business calls paid.

City commissioners have very positive views of your leadership, business smarts, and professionalism. In recognition of your performance, the city commission wants to give you a 10-percent raise in your base salary. City employees during the same time period were limited to a maximum of a 7-percent increase.

Discussion Questions

1. Do you take the 10-percent raise?

2. Do you refuse to accept the 10-percent raise, saying that “I appreciate the recommendation, but I am unwilling to accept any more than what our employees can receive.”

3. Is there an ethical issue?

Case Assessment

Wally Hill, Deputy County Administrator, Hillsborough County, Florida:

Under these circumstances, I believe the proper course of action would

be to accept no more than a 7-percent salary increase, unless doing so would violate any existing governing board policy or employment contract the city manager may have. That judgment is based both on ethical issues as well as pragmatic management principles.

The city manager’s ethical obligations that are relevant to this situa- tion would be to: (1) act in a nondiscriminatory manner in all personnel transactions, emphasizing fairness and equity; (2) provide unbiased and responsive advice to the governing board on policy matters; (3) sup- port and execute all legal policies of the governing board; and (4) honor any personal commitments made to the governing board through an employment contract.

Accepting no more than that offered for other employees supports the ethical obligation to act in a nondiscriminatory manner that empha- sizes fairness and equity. It could inject a degree of self-interest bias in recommendations to the governing board on compensation, as the city manager would benefit from the increases recommended for other employees. However, not to advise the governing board on important matters of compensation, in order to avoid that potential bias, would fail to be responsive to their need for professional guidance. Ethical issues number (3) and number (4) cannot be assessed with the given informa-

tion, as it is not clear whether the proposed increase is based on existing city policies or an employment contract with the city manager.

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Apart from ethical concerns, it makes sense from a management perspective for the city manager to decline a salary raise that exceeds that possible for other employees. Doing so would demonstrate the city manager’s concern for fairness and equity, show a willingness to be regarded as a team member, and inspire greater loyalty from the other employees. Those perceptions would facilitate coop- erative actions to achieve organizational goals and strategies. If the city manager were to accept a greater raise, it could promote an image of the city manager as

aloof, insensitive, and self-serving. Who would want to follow the lead of such a person?

Stephen Bonczek, (former) City Manager of Largo, Florida, and Beaumont, Texas:

Th e question is a good one that probably doesn’t affect too many man- agers as councils are sensitive to the public’s reaction to manager com-

pensation—It’s too high! I would accept the raise if it had substantial support on council. In times of financial stress where there are budget cutbacks and layoffs, I have accepted no raise while union and other employees did receive wage increases. It was more of a leadership rather than ethical issue.

Th e manager, as a contractual employee working for a political body that can remove the manager on a whim, is not comparable to what most public employees experience. In general, CEO’s compen- sation and benefits exceed other employees by a substantial amount in order to attract and retain talented individuals dedicated to public service. Most employees understand the challenges of a local govern- ment manager and have no desire to work under the difficult conditions every day facing the possibility of being fired for no or any reason.

While you could make this an ethical decision based on the fairness of receiving a larger raise on a larger salary base, I don’t see it as a con- fl ict of values or right versus wrong. Accepting the raise is not inher- ently wrong or right, but a judgment based on many factors. What good will be achieved by accepting only a 7-percent raise? Will this have a dramatic influence on the council’s and the public’s perception of your integrity? Will your credibility be enhanced by accepting less? Will anyone care or remember a year from now? If everything in the community is good as you describe it, this may be one of the few oppor- tunities to be offered a reward for high performance and the ability to accept it with limited negative reaction.

Steve Thompson, City Manager, Marco Island, Florida:

Clearly there is good work and success taking place, and although there are no ethical issues involved, the success is success of the team’s

Encouraging Ethical Behavior ◾ 83

effort and this should be reflected in public comments on the issue of compensation. At the same time, the city council is willing to publicly compliment and support the manager, and any comments should rec- ognize the leadership of the council and avoid placing the council in the difficult position of appearing out of touch or being corrected by the

manager for their generous support.

Clearly, accepting the 7-percent increase is appropriate and in keeping with the maximum increase for other team members who contributed to the city’s success. This also supports the team effort and sends the mes-

sage that we are truly dependent on each other and “in this together.”

So, the remaining question is how to graciously and publicly accept the compliment from the city council, without putting the council in

a difficult position with the public. We don’t know the financial situa- tion of the manager or the salaries in comparable jurisdictions, but the manager has options:

1. Simply accept the 7-percent increase and meet privately with each member of the council to express thanks before giving a public comment thanking the council for their support, accepting the

7 percent as equal to the highest raise for members of the team and acknowledging the compliment and their leadership. The comment in this instance should reflect that the higher salary rate increase was high praise indeed, and that the manager’s hope is that future years will be equally successful.

2. The manager could also deflect the compensation into another path—if retirement is a concern, this could go into an annuity or as a contribution to the manager’s retirement plan. The man-

ager often has a different retirement plan than other employees, and this may be an acceptable alternative to an outright salary increase.

3. Or, use this as an opportunity to suggest a multi-year incentive plan—if the manager stays with the organization for three to five years and maintains a good or better evaluation for each year, the manager receives the funding as a salary “bump” recognizing longevity and performance.

Under any conditions the team should be recognized, and the hard work and leadership of the council acknowledged so that future kind words and support are encouraged.

Author’s Note: Based on a real case reported in the Sun-Sentinel, September

84 ◾ Ethics Moments in Government: Cases and Controversies