Fairness is in the eye of the beholder

20 December 2016

Thomas Pikety’s book, Capital in the 21st Century, became an unexpected best-seller by tapping into a latent public concern about inequality in advanced economies. The same concern has been credited with triggering high profile political upsets in the Western world during 2016 - and is now very much the issue du jour - perhaps not before time.

The UK Prime Minister, Theresa May, has placed creating “an economy that works for all” at the centre of her domestic policy agenda. In November a Green Paper on Corporate Governance Reform was published containing a number of proposals that have a focus on pay fairness at their core. These include enhanced voting powers for shareholders, mechanisms for employee and stakeholder consultation on pay, and disclosure of pay ratios between CEO pay and the wider workforce.

But what is fairness? For some, fairness is expressed in terms of equality of outcome. For others, it is about equality of opportunity. Yet others believe there is no definition of fair other than what the market is prepared to pay. What is beyond doubt is that boards will need a much clearer view than previously on how their actions sit in the context of the fairness debate, if we are to rebuild public trust in business. But for that they need frameworks to help them.

For this reason we are working with the London School of Economics and Political Science to undertake research into the attitudes of executives on questions of fairness, and to compare this with views of the general public. Coming out of this we hope to provide insight to help boards think about fairness in their organisation. Such a framework needs to find the right balance for the organisation between market competitiveness, internal relativities, payment for contribution and performance, and minimum acceptable wages.

With technology unleashing profound changes upon the labour markets of developed and emerging economies, organisations will need to engage employees and react to the inevitable political pressures that will be brought to bear on large employers. Pay fairness will be key.

If you’d like to take part in our research, please visit our Global Ethics of Pay survey and for more information, please contact Justine Brown at justine.brown@pwc.com

 

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