Pay: The Final Frontier of CSR?
I’m reading last year’s ethical must-read, The Spirit Level by Richard Wilkinson and Kate Pickett. The central thesis of the book, if you’re even further behind the curve than I am, is that virtually every social ill (poor health, imprisonment, low life expectancy etc, but weirdly not suicide) is worse in unequal societies like the USA and UK than in equal societies like Japan or Sweden. The book caused a minor political fuss as free-marketeers denounced it as a left wing tract, however the authors point out that equal societies can be either big-state like Sweden or small-state like Japan, so the left/right distinction is irrelevant. Whatever the authors’ politics, it is hard to argue with the numbers – and it is a book full of data.
So what has this got to do with business? Well, as Business Secretary Vince Cable pointed out recently, in 1998 the average FTSE 100 Chief Executive’s pay was 45 times the UK average salary, but in 2010 that factor had risen to 120. So certainly in the UK, the corporate pay structure is increasing inequality and thus, if you accept The Spirit Level’s thesis, contributing to a whole raft of social problems.
It is beyond the scope of this blog to debate what our political leaders could and/or should do to address this issue, but given CSR stands for corporate social responsibility, business leaders cannot idly waive responsibility either. Unfortunately, best practice on executive pay seems to start and end with transparency.
Many third-sector organisations set a maximum ratio between best and worst paid in the organisation – should the for-profit sector follow suit? Wouldn’t that set a “responsible” business out from the crowd?