Jobs sum­mit’s pay-gap frip­pery

Dis­clos­ing pay dif­fer­en­tials will do noth­ing to nar­row rapidly widen­ing gap

Financial Mail - - BOARDROOM TAILS -

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

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.