What is fair in corporate vs labour? | Fin24

What is fair in corporate vs labour?

Aug 14 2014 01:10

Labour Q&A with Terry Bell

Fin24 user Janet Pretorius has been grappling with the subject of the gaping income gap for a couple of years and is still looking for answers on fair remuneration. She writes:
Hi Terry
I am busy with a master's degree in social equity reporting by JSE companies.  This basically revolves around transparency in reporting regarding incomes, gender, race, etc.
My approach is that corporates are paying lower levels of staff too little and too much at the top. My point is that a country cannot grow if the lower levels are paid so little that their incomes basically only cover survival and leave nothing for further growth in terms of education and self improvement - which basically keeps the masses poor.
Big business's approach is that they cannot afford to pay lower levels more but when it comes to increases the lower levels receive inflation +1 and upper levels receive far more. 

The other argument is that there is an over supply of labour and therefore labour is treated as a cheap, exploitable commodity rather than an asset. I don't believe people should be treated as commodities as this is not sustainable in the long run if one looks at past revolutions, although the same pattern seems to repeat itself over centuries which makes me question if it isn't "normal". 

Companies set aside money every year for growth but this does not necessarily seem to reflect in financial statements. The companies have not increased substantially in size, employee numbers or wealth (or maybe I'm just not reading the statements correctly. I am dealing with ten companies over a six year period - so maybe my sample is not substantial enough to see growth).
A further issue I've noticed is that despite the "independence" of Boards of Directors (BoDs) - the income gap has not changed in over a decade - also despite national and international reporting guidelines - which leads me to question their efficacy and lack of bias.
Should you have the time - I would appreciate your views on some of these comments.  I have been battling with this subject for a couple of years and am still no further in reaching an answer as to what is fair/just in the corporate world vs labour.
I look forward to receiving your response.

Terry Bell responds:

Hi Janet

To answer fully the questions you ask would require a thesis-length response. However, I shall try to give, briefly, my views. 

In the first place, I think the world's technological progress has outstripped the political and economic system in which we operate. What this mean is that we now have the technological ability to adequately - and sustainably - provide food, clothing and shelter to all of humanity. 

However, because our hierarchical political and economic system is based on individual competition rather than co-operation and co-operative governance, the technological advances have served only to make millions of people redundant and resulted in widespread and, I think, growing social instability.

In times of instability there is also a tendency, encouraged by a competitive environment, to grab as much as possible as quickly as possible just in case there is nothing tomorrow. This, I think, is part of the reason for the often obscene payments that corporate heads get paid (effectively pay themselves). 

In so doing, they are, in fact, acting against the interests of the system that sustains them: the rules of the system demand that wealth generated should be ploughed back into the enterprise in order to make it more competitive. In this era, however, this often means greater automation and mechanisation, resulting in further unemployment and poverty. 

But the problem is that there is already a surplus, either of production or capacity to produce of just about every human requirement. And, in the competitive pursuit of profit - a prerequisite of the system - resources are plundered in an unsustainable way (the marine environment being a classic example).

I think your sample of companies is perhaps too small or skewed. The past six years (if that is your timeframe) is also a particular period of difficulty for companies. What happened on a global basis were mergers and takeovers over a number of years leading - take the grain sector as an example - to a handful of companies effectively controlling the global market.  But trading conditions have become much tougher in recent years and there has been a marked decline in a number of companies and sectors.  

From the sounds of it, you are attempting a factual analysis, so you should try to avoid introducing moral concepts. It is correct, therefore to criticise company directors for excessive pay packages, but only because this harms the company. The fact that companies and corporations get away with paying poverty wages - often by switching production around the globe on a contract basis - is merely a logical outcome of a system that demands the maximisation of profit. The directors are also trapped within the system. 

Put crudely: good bosses (those who prioritise the welfare of their workers) go bust. I think - as you probably do - that this is a nasty, brutish system. But this is what we have and we need to understand it fully, especially if we wish to bring about change.  And, in that case, we should be very clear about what we want - and how we hope to get there.

All the best with your Masters.

- Fin24
* Add your voice or just drop Terry a labour question. Follow Terry on twitter @telbelsa.

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