Justice and Fairness

Below is a 'Thought for the Week' I wrote about the issue of executive and banker's pay for the Diocese of Worcester website entitled How Much is Fair?  Since I wrote it I see that the Chairman of RBS has said that banker pay has been too high for too long and needs to be corrected.  In the same article the Chief Executive of Deutsche has said that there is the danger of a social time bomb arising from wealth and income inequality, though his solution appears to be more philanthropy.

Sir Philip Hampton's views about the need to pay high rewards to bankers to be competitive in that particular job market even if they are high relative to everyone else only begin to recognise the wider issues that I discuss and the Chief Executive of Deutsche shows there is a debate to be had about whether the negative effects of such pay can be overcome by giving enough of it away or if it simply needs to come down.  Many shareholders, who may feel that they have had a poor deal compared with the senior staff, might feel the latter but there is a wider issue of what is fair and just in society as a whole.

"How Much is Fair?

Most of us are feeling pretty squeezed at present.  So the issue of executive pay, which has soared away far ahead of the rises that everyone else has had over recent years, is a contentious issue.  So much so that our politicians have felt it necessary to put forward ideas for controlling the pay of directors and to put pressure on RBS about the bonus of its chief executive.  Whilst this may have a small effect on those in the boardroom, it will have no effect on the many bankers (and others) who receive six figure salaries and more because they are not directors and are not affected by the proposals.

More significantly though, the controls proposed by both government and opposition only attempt to make changes at the margin and possibly connect pay a little more closely with performance.  The fundamental question of what is reasonable remuneration, ‘compensation’ if you like, for the work done, the responsibilities borne, the results attained is not really under consideration.

We are told these huge sums of money are needed to attract the highest talent and that bonuses are necessary for motivation.  For bonuses to truly motivate there has to be some kind of connection between the performance of the individual in effort or ability (or cleverness in wheeling and dealing), the results achieved and the reward received.  Often this is far from clear.  A former chief executive of Shell, who was paid many millions, has said that if he had been paid 50% more he would not have performed better and if he had been paid 50% less he would not have performed worse.  People are motivated by many other things not just, or even, money.  As for paying to attract talent, if firms attempt to pay ahead of the bench-mark, then the bench-mark will continually get higher and the only point of reference is within the group, not the rest of the world.

However, a connection with the rest of the world will eventually matter.  Even those setting the agenda for the World Economic Forum in Davos are saying that ‘severe income inequality’ is the biggest global risk.  At the heart of this are issues of justice and fairness on the one hand and freedom on the other – two of the themes promoted by the Kingdom People material we are being encouraged to think about by the Diocesan 20:20 Vision Group.  Bill Gates has praised the freedom of capitalism that allowed him with a few friends to create Microsoft in a garage – and he now has the freedom to give away much of his unimaginable fortune to good causes as he sees fit.

There is no doubt that the Bible, in both the Old and New Testament, speaks out against slavery and oppression, whether political or economic, but the freedom of any individual or group needs to be held in tension with the obligations and mutuality they share with those around them.  Which is where equity, fairness and justice come in.  Not simply in terms of what might be seen as a reasonable reward but in what it says about the value of everyone and their contribution to the whole, and also because great wealth can bring disproportionate influence and power.  It can also be damaging to the soul (e.g. Mark 10:21-22, Luke 12: 20-21)."

There is a word limit on Thoughts for the Week so this is a little more compressed that might otherwise have been the case.  The almost throwaway biblical references at the end raise some important points about our attachment to wealth and the way in which it can distort our priorities both in terms of the things that really matter in life and in giving us a false sense of security.  Whilst this is heightened for those with great wealth, it may also be true for many others of us who live in relative comfort.  There is a moral and ethical imperative that is more important than a purely financial one.