The ethics of pay in a fair society

14 November 2017

Fairness matters, but doesn't mean equality

We are in the midst the most significant corporate governance reforms in the UK for many years. The introduction of pay ratio disclosures, likely further regulation on broadening the remit of remuneration committees, increasing stakeholder voice within the boardroom, and enhancing reporting of how companies are meeting their Section 172 responsibilities to wider stakeholders, all form part of a wider Government agenda: to convince the public that market economics remains the best way of delivering prosperity for everyone. 

These different elements of soft and hard regulation have at their core a common belief. In order to rebuild trust in business, and indeed capitalism, business needs to do more to demonstrate that stakeholders, in particular employees, are being treated fairly. If companies are to meet these raised expectations they must determine what fairness means in a corporate context. 

Attitudes to fairness are complex and multidimensional, a single definition cannot capture the wide spectrum of attitudes in this area. It is a concept that is easily hijacked by special interests and one-dimensional views that equate fairness with equality, as we have seen recently with the pay ratio proposals. It is a complex debate, more fair does not mean more equal. Why People Prefer Unequal Societies, a recent paper in Nature, argues that the focus on inequality is overdone. What people actually want is a fair society, not an equal one.

But what does "fair" mean? Given their importance in setting organisational culture and priorities we decided to find out what senior executives think. PwC’s collaboration with the London School of Economics and Political Science engaged with over 1,000 senior executives from multinational organisations across the world. Our research explored their attitudes to different principles of distributive justice, in relation to their company and society.

The results are fascinating and give important insights for organisations wrestling with this topic. We hope through this report to start developing a language of fairness that reflects its nuanced and multidimensional nature. For companies there is an opportunity to engage with this framework to develop people policies with benefits for long term value and productivity within their workforce. But at the same time to develop ways of speaking about what they do to help rebuild trust in society. Companies need to claim their stake in this debate. Inaction from the corporate sector risks ‘fairness’ being defined in restrictive and counterproductive terms. 

It’s time for companies to figure out what they mean by “fair”.

The research paper can be found here.

I wrote this article while a Partner at PwC and so references to ‘we’ and ‘our’ should be read as referring to PwC

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