David Cameron stepped into the issue of Executive Pay last week on the Andrew Marr Show, and the topic has once again graced the media airwaves. Frustrated at what he called ‘excessive executive salaries’, Cameron argued that his concerns were not so much that Directors within the FTSE 100 earned what they did, but that they earned what they did despite clear corporate market failure. Here are some statistics: between 2008 and the end of 2011, a period of deep economic downturn, figures suggest that whilst pay for the average worker either fell sharply or at best flat-lined, that of Board Directors almost doubled, going up by 49%. Indeed, further evidence suggests that pay rises were born more out of the somewhat accepted state of affairs whereby fellow Board Directors simply rubber-stamped each others inflated s alaries or what is termed ‘Merry-go-round capitalism’ based on a cronyism of ‘old boys’ networks. Of course, this is all to be understood within the backdrop of the fact that executive pay in the UK over the last 20 years has gone up 8 times, the highest in the world, even more than America
The intention here, however, is not actually to directly castigate the practices described above – am sure this has been done several times over. Rather, I actually want to highlight the implications of such practices showing how they negatively impact the very fabric of business ethics. David Cameron used two very interesting words in this regard which rang true to me: ‘Transparency’ and ‘Fairness’. I add a third, ‘Inclusivity’.
‘Fairness’, (or the quality of being equitable in all one does), ‘Inclusivity’ (or the quality of being accepting of alternative views), and ‘Transparency’ (or the quality of being open, visible and beyond reproach), are the 3 fundamental principles of diversity, are at the heart of not just business ethics and corporate people processes, but importantly, are those core qualities that govern us as moral beings. Would you wilfully choose to build a business relationship with persons you had reasons to suspect had questions pertaining to their character in the three aforementioned areas? I think not…
Since working in the diversity and talent management function, I can sincerely say that experience has taught me that almost every time an organisation says that they have issues attracting and retaining talent, it more often than not refers to the fact that the values of fairness, inclusivity and transparency have been compromised in their people processes in some way or the other. The resultant consequences can be rather costly to ‘fix’ – for it does not just cost money, importantly, it also takes vasts amount of time to re-build that shared ethic which has been lost.
When you think of it, recruitment, selection, assessment, promotion and development, performance management and associated remuneration and incentivisation packages, all constitute the traditional ‘avenues’ through which organisations ensure that each individual talent is accorded that which they are due – through demonstrable and irreproachable hard work. In other words, business processes were themselves designed to ensure that the ethics of fairness, inclusivity and transparency governed the process of business success and the sharing of proceeds accordingly. Indeed, experience has also taught me that when ‘going underneath the skin’ of organisations to find out why these values are absent, more often than not, their absence tends to be due to their absence in the visible behaviours of leadership.
All the above said, a pertinent point must be made: that where people processes are by-passed leading to the type of ‘Merry go-round capitalism’ described by the Prime Minister, my view is that such a state of affairs constitutes a ‘new’ kind of discrimination (a term I use sparingly) – a financial one. For at the heart of the issue of awarding excessive salaries is a financial discrimination, one that discriminates against anything other than the stereotypical white male that tends to constitute this ‘group’, and having a negative impact on women, those from non-traditional ethnic backgrounds, and those with disabilities, etc
Some may feel the above is a somewhat controversial point to make. I don’t. I think it makes common sense, as human history itself shows us that at the heart of persistent inequalities are financial and economic inequities. Indeed, this is a point acknowledged here in Europe by the European Constitution, when in the development of its guiding principles, it is made extremely clear that all Member States must promote pay equity between the sexes as a fundamental prerequisite to the success of the Union and key to its continued legitimacy as a political body. It has always been a long-standing view of mine that the politics of equality has a lot to do with the politics of economics.
Finally, a quick word on the clear link between recent Gender focussed initiatives and what we have been discussing above: For it is precisely the absence of fairness and transparency in pay awards that has culminated in the hardening of the ‘glass-ceiling’ leading to, in my view, the ‘unfortunate’ steps some countries have taken to introduce diversity quotas and targets as a direct means of attempting to break through the ‘glass’ of cronyism and long-standing old boys networks. Surely with the development we have seen in our world across a variety of areas, we ought to be capable of using our natural intelligence to install non-tokenistic corporate ethical practices that practically promote fairness, inclusivity and transparency to all?
Is it really ‘Merry-go round capitalism’ then that is the problem as David Cameron put it? I actually think that the issue is not so much about capitalism but about our management of it. Capitalism needs to be re-humanised. It needs a conscience. Indeed, its re-humanisation will ensure that each is given their due – leading to the creation of a more equitable world for all – regardless of socio-economic and historical backgrounds.
Jude-Martin is Director of Diversity is…a consultancy focused on providing a fresh and innovative approach to diversity through the provision of HR services covering Strategy, Assessment, and Development for ensuring effective people management in the 21st century global business context.