This is the first post in a brand new CSR Hub series called 'In Focus'. As we established in one of the first posts on this blog, 'What is CSR?', it is clear that CSR is an umbrella term and that endless issues exist within it. Therefore, the point of this article series is to choose one particular issue to look at, and go into detail about why it's important and what companies are tackling it successfully.
Whilst this type of pay gap certainly doesn't receive the same amount of attention or consumer pressure as the gender pay gap, it is still an incredibly important issue and one that can really say a lot about a company's approach to CSR. As we highlighted in one of our Top Tip articles, staff are incredibly important, and the way a businesses treats them will really speak volumes about the kind of business they are.
So why is this pay gap important?
Firstly, there is quite a strong argument to suggest that lower pay gaps lead to higher job satisfaction and employee engagement. After all, whilst businesses may be owned by the CEO, they wouldn't be able to survive a single day without the lower paid workers. It is the workers who actually make the business what it is, as without them there would be nothing. Naturally then, it would be quite demotivating to know that whilst you're on the front line working hard, the CEO of your company is earning hundreds of times more than you are.
Secondly, high pay gaps usually relate to greed and wasted opportunities. For a pay gap to be worryingly high, the CEO would have to be making a ridiculous amount of money every year. Often this is simply a result of greed rather than logic, as it results in the CEO taking as much money as they possibly can, even if it's far more than they will ever need. It also shows wasted opportunities. If a CEO is taking an excessive annual salary, it simply shows a lack of care for alternative things that their money could be spent on. For example, instead of taking a salary of 30 million a year, why not give more back to the community? Why not invest in social projects and more eco friendly production methods? Until a business is actively thinking about these kind of uses for their money, there isn't really a need to use it all for extortionate salaries.
So what should the pay gap be?
What's really important to state is that we aren't suggesting that CEOs pay themselves exactly the same as the average worker. After all, if they started the company they deserve some reward for all their hard work. What we are really highlighting is the excessive nature of the pay gaps, and the increasing trend that we are unfortunately witnessing. Income inequality is becoming a huge issue around the world at the moment, and having such a unnecessary difference in pay between the CEO and the average worker is only going to fuel that problem, rather than tackle it.
Realistically, there is no golden ratio that every company should try and abide by, but naturally the lower your pay gap the more socially responsibly you're being, and the more engaged and motivated your employees will be.
Examples of good businesses:
Hewlett-Packard - CEO only earns 6 times more.
Microsoft - CEO only earns 11 times more.
CostCo - CEO only earns 18 times more.
Examples of bad businesses:
Goodyear Tires - CEO earns 323 times more.
Walt Disney - CEO earns 283 times more.
Boeing - CEO earns 198 times more.
Are things looking up?
Whilst this may seem like the problem is incredibly bad, I think it's safe to say that things are looking up. Already we have big companies like Microsoft and HP actively addressing this issue and showing other businesses that it is possible. In addition to that, this type of pay gap is slowly gaining as much attention as the gender pay gap, and from 2017, companies are going to have to publicly release their CEO-Worker ratio. This could be a great turning point with regards to businesses reducing inequality and becoming more socially responsibly.
Thanks for reading. As always please share this article if you found it interesting or useful, and any comments will be greatly appreciated. Also, have a look at our new eBook on the right hand side. For just £1 you can find out all of our great CSR ideas that are completely free and can even make you money.
This first post is going to focus on what's called the 'Pay Gap'. Now, there are actually different types of Pay Gap, for example between men and women, but we're going to focus on the gap in pay between the highest paid member of staff (usually the CEO) and the median salary for the workers. For example as of August 2015, the average CEO earned approximately 204 times that of the median worker salary.
Whilst this type of pay gap certainly doesn't receive the same amount of attention or consumer pressure as the gender pay gap, it is still an incredibly important issue and one that can really say a lot about a company's approach to CSR. As we highlighted in one of our Top Tip articles, staff are incredibly important, and the way a businesses treats them will really speak volumes about the kind of business they are.
So why is this pay gap important?
Firstly, there is quite a strong argument to suggest that lower pay gaps lead to higher job satisfaction and employee engagement. After all, whilst businesses may be owned by the CEO, they wouldn't be able to survive a single day without the lower paid workers. It is the workers who actually make the business what it is, as without them there would be nothing. Naturally then, it would be quite demotivating to know that whilst you're on the front line working hard, the CEO of your company is earning hundreds of times more than you are.
Secondly, high pay gaps usually relate to greed and wasted opportunities. For a pay gap to be worryingly high, the CEO would have to be making a ridiculous amount of money every year. Often this is simply a result of greed rather than logic, as it results in the CEO taking as much money as they possibly can, even if it's far more than they will ever need. It also shows wasted opportunities. If a CEO is taking an excessive annual salary, it simply shows a lack of care for alternative things that their money could be spent on. For example, instead of taking a salary of 30 million a year, why not give more back to the community? Why not invest in social projects and more eco friendly production methods? Until a business is actively thinking about these kind of uses for their money, there isn't really a need to use it all for extortionate salaries.
So what should the pay gap be?
What's really important to state is that we aren't suggesting that CEOs pay themselves exactly the same as the average worker. After all, if they started the company they deserve some reward for all their hard work. What we are really highlighting is the excessive nature of the pay gaps, and the increasing trend that we are unfortunately witnessing. Income inequality is becoming a huge issue around the world at the moment, and having such a unnecessary difference in pay between the CEO and the average worker is only going to fuel that problem, rather than tackle it.
Realistically, there is no golden ratio that every company should try and abide by, but naturally the lower your pay gap the more socially responsibly you're being, and the more engaged and motivated your employees will be.
Examples of good businesses:
Hewlett-Packard - CEO only earns 6 times more.
Microsoft - CEO only earns 11 times more.
CostCo - CEO only earns 18 times more.
Examples of bad businesses:
Goodyear Tires - CEO earns 323 times more.
Walt Disney - CEO earns 283 times more.
Boeing - CEO earns 198 times more.
Are things looking up?
Whilst this may seem like the problem is incredibly bad, I think it's safe to say that things are looking up. Already we have big companies like Microsoft and HP actively addressing this issue and showing other businesses that it is possible. In addition to that, this type of pay gap is slowly gaining as much attention as the gender pay gap, and from 2017, companies are going to have to publicly release their CEO-Worker ratio. This could be a great turning point with regards to businesses reducing inequality and becoming more socially responsibly.
Thanks for reading. As always please share this article if you found it interesting or useful, and any comments will be greatly appreciated. Also, have a look at our new eBook on the right hand side. For just £1 you can find out all of our great CSR ideas that are completely free and can even make you money.
This post first appeared on Sell No Evil | Corporate Social Responsibility, please read the originial post: here
