Unjust Rewards

 

Good session at the RSA last night looking at greed and inequality in Britain today.

The session was opened by Polly Toynbee, author of a long-term favourite text of mine, Hard Work: Life in Low-Pay Britain, and who has just co-authored Unjust Rewards with David Walker.

Among the various facts that Toynbee presented were that although half of earners earn under £23k, only 10% earn over £45k.  But these people still don't feel rich.

The reason seems to be the gap between most of these people and those at the very top, those who Avner Offer, author of The Challenge of Affluence, called the Masters of the Universe, and Will Hutton, author of The State We're In called the Have Yachts, or even the Have Lots of Yachts (in contrast to the Have's and the Have Not's).

And whilst the incomes of the people at the bottom are falling, the incomes of those at the very top are the ones that are growing most.

Remuneration committees have let FTSE CEO salaries spin out of control, and in fact, according to Patterson Associates, with the exception of LTIPs, CEO rewards don't even relate to the performance of their businesses.

Private equity boss, Jon Moulton argued that the high pay of CEOs doesn't matter as much as whether these packages are appropriate and useful: "We put ourselves at some peril if we attack the ludicrous amounts of money they are making.  It's not about justice, it's about about self-interest."

But Toynbee's argument is that this level of inequality is not just unfair and immoral but also dysfunctional.

Whether are not we are living in a broken society, there's an increasing dissonance between what people being told about the country's wealth and how they're feeling about their lives.  For example, fear of crime is increasing although actual crime levels are falling fast.

This has a serious impact.  Inequality has a serious impact on health and well-being as well as social cohesion and mobility.

And Hutton thought the fact that most Have Yachts aren't engaged in philanthropy, and don't understand how most people live, means that they have declared independence from the rest of us.  This breaks a fundamental principle of human association which is proportionality.

Have Yachts are being paid for beta, not alpha performance.  For being in the right place at the right time.

As David Willetts, MP, concluded, meritocracy is like tennis: "Just something the middle classes play with each other", but which isn't really available to the wider population.

But, in Toynbee's words: "It doesn't have to be this way.  We can shrug off our economic fatalism.  The way we choose to live is in our hands and we could do better."

One part of the solution is a more distributive tax system, but as Hutton commented, "it's a system wide issue" and I can't see how Toynbee's "mutual obligation to well being" will be created without some deeper changes in the way we think and act.

This then takes us back to the theme of earlier RSA event which concerned the need to change the way we think about ourselves.

In fact there have been quite a few good events at the RSA recently and the organisation seems to be really buzzing, although I'm a bit worried that another private equity boss and HR critic Luke Johnson will the society's next chair.

I wonder what he's been doing to reduce the CE / staff pay differential at Channel 4?

 

Please note, that with the exception of that last cheap shot, these notes attempt to summarise what was discussed in the event, rather than providing my own opinions on the justness of rewards.  Maybe it's just because I recently worked for a large, global reward consultancy where we deliberately avoided any discussion on fat cats et al, but I feel slightly uncomfortable discussing my personal views on these issues, so for example I deliberately refrained from posting on the arguments over non-doms earlier this year.

But given my allegiance to the RSA and the fact that I decided to post on this event, you can probably guess where I'm coming from!

 

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