Trump and I agree on one thing: liberals and centrists love to whinge. If we are clever, we engage in intellectual self-gratification, showing how well we understand the complexity. If now isn’t the time for a big pivot in how we show up in the world, in actions and not just sophisticated banter, when would be?
Democracy is losing popular support across the Western world, particularly with younger voters. Combined with the power of vested interests, this could mean the end of progressive change on many fronts for one or two decades, or worse.
There is now growing evidence of a clear link between this erosion of support for democracy and growing income inequality over recent decades. Institutional investors have, collectively, helped to set the current norm about internal pay inequality – namely, anything goes. That’s what ‘we don’t think quantum is an appropriate matter for investors’ means in practice. So now it’s time for investors to set a more responsible norm. Critically, investors can’t wait for government action.
I can hear the immediate ‘yes, buts’!
What’s the ‘right’ level on inequality? Sidestep this convenient excuse: each firm should set, and justify in public, its ratio, or explain why no level of inequality is wrong.
• Is it the CEO/median, CEO/lowest or CEO/NEO ratio? Each ratio has a different purpose, so report on all.
• How can ‘Wall Street’ enforce greater equality on ‘Main Street’ when finance is the worst culprit? Convert weakness into strength: investors can announce their own maximum ratio.
• Won’t this encourage companies to outsource low-paid staff to artificially raise median income? The notion of companies choosing to outsource just because of this disclosure isn’t credible but even if this happens, the rating agencies will find ways to correct for inauthentic corporate reporting.
To paraphrase US anthropologist Margaret Mead, all it needs is for a few committed individuals within each investment organisation to trigger this change. As Milgram showed in his famous experiments, (real) students will ‘electrocute’ actors who are pretending to be experimental guinea pigs when instructed by an authority figure (an actor). But when there is a dissenter (another actor) in their midst, the students are much less compliant. All the ‘positive maverick’ had to do was challenge the instructions in public, and compliance dropped dramatically.
The best time to ask and choose accordingly is when you join a new firm or buy a new financial product. But there are many other opportunities for having impact – town hall meetings, employee engagement surveys, a drink in the pub – be creative.
Many people tell me they like reading my column. When I ask them what they do, they shrug, often with a guilty smile. I guess they are giving their values a bit of an intellectual workout, then returning to business as usual.
Whether you want to waste your time reading on that basis is, of course, your choice. What I would really love is for you to do something about internal pay inequality – something really small that you can do today. Make a list of the 3-4 colleagues that you could talk to about this issue, initially one to one, because there is a decent chance they might agree with you.
I don’t suggest you read a book about inequality to be more persuasive. Find people who already share your concerns. Getting the message across to the agnostics and disinterested can happen later and you can ignore the sceptics; they will only change when they realise it is career-enhancing to go along with the new norm. Please keep me posted about what you decide to do and how it turns out.
Dr Raj Thamotheram is CEO of Preventable Surprises and a visiting fellow at the Smith School, Oxford University