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How much is a human being worth?

Over recent months the government has declared that employees (including bosses) should be neither over-paid nor under-paid. That’s fine – but how do you judge what is too much or too little?

It turns out that at the top, the level of pay for CEOs currently bears no relationship to performance, as measured by return on capital invested. Yet pay at the top is typically set by a dedicated remuneration committee. The problem is that the members of the committee are part of the magic circle of top employees themselves – so of course they behave ethically and treat others just as they would like to be treated. The result is that top pay escalates without apparent limit.

For those companies that obey the law, at the bottom of the employee payscale there is the minimum or ‘living’ wage which will in practice define the pay of the lowest paid. (Actually there is a big space below that characterised by under-employment and zero hours contracts, but that is perhaps another story.) As far as employees go, there is a proposal for companies to publish the ratio of the pay of their highest paid individual to the average wage. Why the average? Because the average is higher than the lowest wage, which will usually be the minimum wage, and so yields a more comfortable ratio.

On the technical side, companies should simply be transparent about the ratio of the highest to the lowest paid. A number of organisations in the charitable sector already declare that. And companies should also publish the ratio of the rate of increase of the CEO to that of the rate of increase of the company’s return on capital – as well as their highest to lowest pay ratios.

But perhaps more importantly in relation to governance, not only should remuneration committees include employee members as has been suggested, but their remit should be extended to consider the pay of all employees. That would go some way to bring the full spectrum of employees face to face with the full spectrum of pay rates. Maybe that will increase the appetite for fairness.

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commentary

Do men behaving badly damage business?

American Apparel has been rebuked in the UK for the sixth time in two and a half years over its advertising. Each time for being offensive to women. It seems the corporate culture behind the ads has affected its share price – which has continued to fall over the past five years, while the markets as a whole have risen.

This is not evidence that doing good drives good business so much as that doing badly in ethical terms can affect business badly.

Why is it then, with cautionary tales like this and the considerable research literature on the matter, that it is still so easy to find examples of poor ethics in business?

There’s clearly still money in behaving badly.

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commentary

Moralising at companies: what's the point?

The government and politicians have been lecturing companies on how to behave a lot recently – there’s tax, training and ISPs for a start. But does it work?

The issue of taxes not being paid has received the most attention. That led to Starbucks volunteering an extra £20m over two years. But that may be it. So pointing out that a company could give more money to the state, or that it could choose to train more local people or could limit access to nasty pornography sites will probably have limited success. Does that make it pointless?

The natural response to such efforts at moralising is that it is indeed a waste of time: the law has to change. On this view, the law and the business case are the only things companies recognise. Yet capitalism also has a moral foundation, as Adam Smith recognised. Companies don’t always do anything they can get away with.

Maybe in the long term moralising can help to change the climate of opinion within which companies operate, creating reputational hazards if nothing else. But it is only in the long term. For tax, training and ISPs it would probably be far more effective to regulate for the solution – but that is more work for the government. And interestingly that work would mainly be in persuading other parties that changing their behaviour would be the right thing to do.

Maybe there’s no escape from moralising after all.

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commentary

Barclays: banking on PR?

If I were an employee of Barclays, I would be very concerned right now. What if I don’t feel like abandoning my own ethics and adopting someone else’s? Apparently Barclays’ CEO has said that all employees must adopt a new code of ethics or go.

But suppose that I don’t mind changing my core values as a person in order to remain employed. What am I being asked to do? One of the ‘behaviours’ within the new code is: ‘Value sustainable progress as much as immediate achievements.’ Does this have anything to do with sustainability or not? It’s hard to tell.

And I might also be concerned that the recent scandals to hit the bank have mostly been about how Barclays treats its customers. So should I worry that Barclays’ old Quaker values included one about ‘fair dealing’, but the new ones do not?

I am reminded of Groucho Marx’s attempt at CSR: ‘These are my values. And if you don’t like them…well, I have others.’

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commentary

Stonewall: when the going gets tough, the tough…just leave

Barclays and Coutts both used to sponsor Stonewall, the organisation campaigning for equality for lesbians, gay men and bisexual people. But because Stonewall has used negative campaigning techniques, highlighting bigots as well as champions, they say they will withdraw their financial support.

Others have pointed out that they should have known, since 2012 is the third year of the Bigot Awards. But it also raises questions about the undue influence that companies may have on the NGOs they ‘support’. If you support an NGO’s aims, is it legitimate to dictate what they do? And should not do?

And in a world where CSR is so closely allied to PR, companies should realise that in financing an NGO, the NGO is actually also supporting the company’s reputation. Damage theirs and your own suffers. What’s more, the harder edged the campaign image of an NGO, the better the company looks for supporting them.

So it will be interesting to see how the re-launch of Barclay’s image gets on.

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commentary

Will Wikileaks spin free?

Should we judge the man or the issue?

The issues raised by Wikileaks are many and tangled. There is one set which is about transparency, whistleblowing and access to information. Those against transparency, often in the security services, cite arguments about the potential damage that knowing the truth could entail. Could it? Unfortunately we will never be able to know because the security services also say they do not want the whole truth to be revealed.

Then there is the set of issues about the sexual allegations against Julian Assange. Again it is difficult to know how much truth there is in these – partly because Assange himself will not submit to the Swedish legal process.

Suppose that the Swedish allegations are well-founded. How does that affect the transparency issues? It doesn’t. Does immoral behaviour in one area of life wholly discredit everything else that that person does? It doesn’t. Does delivering transparency automatically excuse sexual harassment? It doesn’t. But neither does one failing condemn everything that person has done.

So should we judge the man or the issue? Maybe we should judge both. But we should not let those judgements influence each other.

What about the corporate sector role in all this? Outside the media, this mainly seems to concern the financial sector which has joined forces through membership organisations such as Visa to deny Wikileaks its payment services.  The best that can be said is that they started this blockade before the sexual allegations emerged. But why? Visa has issued no press releases on the topic.

And it does seem odd that the financial sector, which really hasn’t done it’s best to position itself as the world’s moral arbiter in recent years, should take this role upon itself.

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announcements commentary

Would changing the rules make business more ethical?

Corruption. Poverty wages. Labour relations and strikes. Regulation for the public interest. Lobbying.  Vanishingly low effective rates of corporate tax.  Fat cat pay. Issues like these seem suddenly to have thrust themselves onto the corporate agenda. So what does this mean for “sustainable business”? (And whatever happened to CSR?)

Time for a reality check – see the full article on the Guardian website.

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commentary

Anti-suicide pledges are not the way forward

Foxconn seems to have a problem with its workforce. The whole working environment – including pay and the treatment of its workforce are too much for its workers: they are taking their own lives.

This is a global problem. Foxconn makes parts for Apple and Sony. There are other Chinese companies with similar problems. And the issue is by no means confined to China – France Telecom has suffered similar problems, with over 25 suicides over 18 months.

The solution cannot be to ask workers to sign pledges not to commit suicide. That will only increase the pressure on them. And it is demeaning. The solution must involve a wholesale review of working conditions, led by unions and accompanied by much greater transparency from the companies involved.

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commentary

An Ethical Gap

The Gap chain has been found to be producing garments using child labour.

While there is no press release on this subject, it has been reported that Gap will not sell, and may destroy, the clothes.  Is this ethical?  While it may assuage feelings of guilt, it is also exceptionally wasteful and perhaps further degrades the workers concerned.

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commentary

How much diversity is enough?

The CRE is trying to tread the line between social fragmentation and uniformity.  Meanwhile the Catholic Church wants exemption from the Equality Act because it would require Catholic child adoption agencies, contrary to their wishes, to deal with gay parents.  The same drama is being played out at more local levels: should a university-funded student society be able to choose which students to admit – for example, only those which are Christian?  Or Hindu? Or believe in a flat earth?

What principles should those who live in the same space be forced to accept?