We don’t need a CEO salary cap to solve inequality — We need this...


4 min read

A recent report from the High Pay Centre revealed that the average FTSE 100 CEO can expect to earn 86 times more per year than the median full-time UK worker.

Almost right on cue, LinkedIn ran a poll that prompted a predictably heated discussion between the wealth distribution crusaders and the devil’s advocate nay-sayers, as well as a weary, cynical sigh from me.

It’s not that I think CEOs should earn disproportionately more than the rest of us — quite the opposite. But the cynic in me wonders if a mandated salary cap will ever happen without the political will to enforce it. And who’s to say it would solve the far wider and more troubling issue of income inequality levels being at their highest level in over 10 years?

Perhaps the question we should ask is this: What can business leaders — as employers first and foremost — do to help tackle income inequality in the UK? And why should they make this a priority?

Besides being the right thing to do, it’s a win-win situation

Being a force for good and wanting to leave a positive mark on society should be at the top of every business leader’s agenda.

And there’s no shortage of proof that fairer compensation equals better productivity and healthier profits. Just look at Costco, McDonald's, Gap, and a host of other companies that are practising what leading economists have preached for some time.

“I don’t pay good wages because I have a lot of money; I have a lot of money because I pay good wages.”

~ Robert Bosch, founder of Bosch GmbH

Moreover, today’s socially conscious talent pipeline wants employers to do more. Deloitte’s 2021 Millennial and Gen Z report found that, of the 23,000 respondents, two-thirds were worried about income inequality in society, and over a third blamed this gap on the self-interest and greed of business leaders and the wealthy.

The report also found that these generations will actively shun companies that don’t share their social conscience.

“Leaders who ignore income and wealth gaps, both in society and in their organisations, risk alienating the very employees their organisations need to prosper.”

~ Deloitte’s 2021 Millennial and Gen Z report

So, whether their intentions are altruistic, selfish, or a bit of both, company leaders should be thinking about upping their game and narrowing the income divide. But how? As a starter for ten…

Stop demanding employees go into the office

Now lockdown measures have eased, many companies are asking that employees come back into the office five days a week. But I’d argue that this wasn’t a fair ask pre-pandemic, and it’s not fair now. Flexibility brings many inclusivity benefits and it’s also much fairer — particularly for employees who struggle to commute to work and live comfortably.

The average UK worker spends 18% of their salary on commuting and, for those who work in a big city and can’t afford to live in it, it could be much more.

But, if a hybrid working pattern isn’t an option, there are ways to help…

Ease the cost of living in other areas

If employees can’t work remotely or flexibly, compensate them in other ways. After all, the poverty rate among working households in the UK is the highest it’s been in over a century, and even if you aren’t on the poverty line, life is still pretty expensive when you sit at the lower end of the income scale.

Things like season ticket loans, petrol allowances, and generous pension schemes go a long way. But you can go a step further — provide free gym memberships, meals at work, and on-site crèches. Or perhaps there’s an even simpler way…

Pay employees fairly from the minute they join

It’s best practice for a company to conduct thorough and independent research into what is fair for that level of experience and responsibility. But even as they do this, they should factor in relative living costs and other outgoings that the job demands — from commuting and adhering to dress codes, to being expected to attend networking events or work socials.

They should also avoid falling into the common traps that reinforce unfair pay. I’m talking about asking what the candidate’s salary expectations are or what their salary history is before deciding and disclosing the offer on the table. These archaic practices lack transparency, ensure underpaid people stay underpaid, and say to the candidate, “We want to see how little we can pay you.”

Doing the research and breaking bad habits is one thing, but companies can go a step further…

And keep paying employees fairly

First off, every company should review annual pay across the workforce, in line with rates of inflation and living costs, so that employees don’t end up with less disposable income than when they first joined.

Secondly, companies should have progression-related pay structures in place for each team, make them visible to team members, and support every employee to upskill beyond their current earning potential.

We don’t need to wait for a mandated CEO salary cap to tackle rising inequality; business leaders have the power and the influence to make these changes happen — and, I’d argue, a responsibility to do so.

It is the right thing to do, and it’s what your current and future employees, your leaders of tomorrow, expect. And at a time where we are seeing CEOs trending for their decision to cut their own salaries and pay their employees more, can company leaders really afford to do the wrong thing? The optimist in me would say, no.

  The Fairer Future inquiry    Find out what keeps our community of business leaders awake at night, and what  it will take to create a fairer future for all. Download the report

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