Jobs summit’s pay-gap frippery
Disclosing pay differentials will do nothing to narrow rapidly widening gap
You could almost hear the remuneration consultants salivating as the recent jobs summit came to a tired close. Even the remarkably vague commitment that “business” would be encouraged to disclose pay differentials could generate tens of millions of rands for these people. The one certainty about the disclosure of pay differentials is that it will do nothing to reduce the rapidly widening gap between executives and workers.
The assumption that disclosing pay differentials might somehow help to restrain the stratospheric increases that boards award their executives every year is based on the belief that our corporate leaders have some sensitivity to the social setting in which they operate. That was the same belief behind the initial campaign to get boards of listed companies to disclose details of their executive pay almost 20 years ago. All that disclosure did was ensure executive pay spiralled steeply upwards as executives ignored society – and possibly economic fundamentals — and focused on being paid at least as much as their peers.
A fabulously wealthy remuneration industry was created as boards, in a now supposedly enlightened corporate-governance era, sought to justify their greed by reference to the “hotly contested market” for executive talent. Every year listed companies pay huge sums to consultants who explain how much more has to be spent to ensure their executive talent is motivated to actually do their jobs and not sail off to some imagined better-paying option.
As one commentator recently said, the obsession our top executives have with doing what everybody else does and not stepping out of line calls into question their leadership skills. To date, only Ketso Gordhan has dared to challenge the executive crowd. He was mauled.
The lack of any action from the government may be due to the useful cover the private sector provides for the overpayment of public sector employees — from inept ministers, whose pay is the least of what they cost this country, to municipal managers whose incompetence threatens the stability of local communities.
The jobs summit suggestion is nothing more than frippery. If the government was less implicated in the problem we could look to something like the UK Labour Party’s proposal that government contracts be awarded only to companies with acceptable pay ratios.
But, given the government’s role in our inequality problem, perhaps we should instead look to US senator Elizabeth Warren’s recently introduced Accountable Capitalism Act.
Warren, who is expected to run in the 2020 presidential elections, is proposing radical changes to the way US corporations are run, including the appointment of worker representatives to the board — not just one or two but 30%-40% — and in particular on remuneration committees. This would help disrupt the echo-chamber design of the present system. Central to this system is that current members get to select new members. This is an effective way of ensuring there’s no threat to incumbent thinking.
With strong worker representation on remuneration committees, the consultants would certainly have their work cut out for them; if they had any work at all.
Worker voices on remuneration committees will help disrupt the current echo chamber