10/02/2012 – Fair pay for a fair day
This week saw George Osborne make a speech in which he stated that we, as a country, needed to avoid creating an "anti-business culture", following the recent furore over bankers and their bonuses. His speech was made on the same day that a House of Commons debate took place over a Labour party motion on bonuses, and came on the heels of RBS chief executive Stephen Hester waiving his rights to almost an extra million pounds this year. Mr Hester also talked to the Today programme on Radio 4, explaining why he took this action, as well as being asked how he justified being rewarded in this way in the first place.
When pushed on the justification for paying large salaries and bonuses, Mr Hester said that was a political debate and that he wasn't responsible for what other people decided to pay him. Regardless of my thoughts on the specific issue of salaries and rewards, this issue came up again when I was asked to participate in an online Q&A on the Guardian's Voluntary Sector Network this week, looking at this issue of how to become a charity chief executive. Questions were raised there about the levels of salary and how these are set, as well as whether overly high salaries could be undermining the work of any particular organisation.
I think this is an issue that could become more prevalent and relevant in coming months and years, as the economic difficulties look set to endure. As people are forced to accept no or low pay rises and unemployment rises against a backdrop of significant welfare reforms and the imposition of benefit caps, I think we all need to think carefully about our use of what is essentially public money, whether by way of donations, grants or commissioned services. In the defence of the charity world, it is worth highlighting a study by the One Society looking at pay ratios and income inequality.
They found that the ratio of top pay to bottom pay in charities with income over £50million is about 10:1. This compares very favourably to local authorities (15:1) and is absolutely overshadowed by the FTSE 100 companies where the figure is a staggering 232:1. To that end, I would support the One Society's recommendation that organisations should report pay ratios annually, in line with the recommendation for public sector organisations as outlined in the Hutton Review of Fair Pay.
I also think it is important for charities to pay all their staff a proper living wage and I am proud that Lasa is a supporter of the London Living Wage campaign. The book The Spirit Level recently demonstrated how income inequality can have adverse implications for everyone in society, rich or poor. As charities, we have a moral duty to ensure that all of our people are properly rewarded for the work that they do, and paying an adequate wage from the bottom up is one key way to achieve this goal.
Of course, we also need to be realistic about using our money efficiently and effectively to meet our charitable goals and missions. So some degree of restraint will be necessary, I feel, to avoid insinuations of complacency or worse. For any charity chief executive, the reward or bonus should be seeing and understanding the difference that your staff and volunteers are making to the people that you work with. As to what the bankers take home, I would merely point out that the RBS bonus pot this year exceeds the total cuts proposed for legal aid by some £150 million - which suggests to me that somewhere along the line, our priorities have become somewhat skewed.
Posted by Terry Stokes on 10/02/2012