A recent explosion in corporate salary levels is bringing business into disrepute, says Tony Morgan, chief executive officer of the Industrial Society of Great Britain.
In a luncheon discussion at the State of the World Forum in San Francisco yesterday (October 28), Mr. Morgan said it was time for co-ordinated action to redress the imbalance in incomes between those at the top of the corporate ladder and those at the bottom.
Introducing himself, Mr. Morgan described his organization as the, "largest independent developer of people at work in Europe."
"I want to start today by inviting you into a conspiracy," he said. "I will be arguing today that we are witnessing a level of self-interest and hypocrisy in the boardroom that is becoming damaging for society."
"Recent boardroom pay increases have prompted a union leader in Britain to say, 'British bosses are greedy bosses.' Surprisingly, rather than being decried as an extremist, his comments were widely supported and the reaction says something about the current mood," Mr. Morgan said.
"Last year, CEO pay rates increased by an average 37.5%, compared to a 3.5% average for all workers."
The point, Mr. Morgan said, was not that the high pay rates of executives were of themselves a bad thing, but rather the message they sent to the public about integrity in the boardroom.
"What is more important is what this tells us about the fitness of our business leaders to lead. Current pay rates encourage short-termism in executive conduct."
Mr. Morgan said that efficient organizations required the trust and support of increasingly autonomous and responsible staff. "But lack of integrity at the top destroys this trust."
Mr. Morgan posited three questions for discussion:
- Was it feasible to get agreement that there is a need for some limit and even, perhaps, a transparent relationship between rewards at the top and rewards at the bottom.
- Who should decide about top executives' remuneration - shareholders, employees or customers.
- What kind of trans-national guidance would assist that process.
Ben Turok, a South African Member of Parliament, said it was not simply a question of corporate pay, but more the fact that the present financial system rewarded the activities of speculators at the expense of the truly productive.
"We have lost the values that govern business and the principles of inclusiveness in our society," he said.
Fellow African delegate, Sithembiso Nyoni, an MP from Zimbabwe, expressed a similar view.
"Small is beautiful, but in this world it is also crushable," she said.
Robert Burnett, founding executive of Cisco Systems and of the Responsible Wealth business network, provided a description of the value systems within which American business presently operated as an explanation for the phenomena of corporate selfishness.
"We no longer have a coherent system of business values operating in America," Mr. Burnett said.
Instead, there was a mixture of three sources of business ethics interacting with each other. One was the dominant market value system in which money was everything, another was the traditional values which in America were exemplified by fundamentalist Christian ideas, and finally there were the longer- range values espoused particularly by those in the environmental movement.
Mr. Burnett concluded his contribution saying the Y2K problem potentially posed an opportunity for the fostering of this last class of values, as there was likely to be a dramatic disruption of the market which would undermine the present dominant system.
Perhaps the most sanguine comment of the discussion came from Islamic Futurist Ziauddin Sardar, who criticized the approach taken by Tony Morgan of focussing on executive salaries. Mr. Sardar said the real problem was far deeper than that.
"There has to be an ethical and moral order. Industrialists need to appreciate that they are the trustees of the people and that they are using collective resources," he said.
Tackling the problem through the issue of executive salaries was, " like telling an elephant to go and then trying to grab it by the tail," he said.