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Fat cats and pay gaps: should pay transparency be mandatory?


About this ThinkIn

The Responsible Leadership Series in partnership with Teneo


The debate over fair pay tends to focus on pay gaps (by gender, race and disability) and pay disparity between the highest and lowest paid. According to the CIPD and High Pay Centre, the typical FTSE 100 CEO is paid £119 for every £1 earned by the average UK full-time worker; the gender pay gap in the UK was 15.5% in the UK in 2020. Campaigners have long argued that resistance to transparency protects those with the most to lose – and the furlough scheme has given the government more visibility than ever over who is being paid what. Opponents argue that greater transparency can, paradoxically, inflate executive pay and entrench pay gaps. Who’s right? How would full pay transparency work in practice? And how could organisations unravel our deeply embedded cultural squeamishness when it comes to talking about money?

The next ThinkIn in the Responsible Leadership Series on 6 July will ask whether CEOs or cyber-criminals are winning the war on cyber security.


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Readout

This ThinkIn was the first in the Responsible Leadership Series in partnership with Teneo.

The Responsible Leadership Series is intended to address a range of the most important and pressing issues facing business leaders today.

The income gap in the UK is glaring, and inequality is proving to be one of the country’s most stubborn issues. Tortoise was joined by Kudsia Batool, Head of Equalities and Strategy at TUC, Wanda Wyporska, Executive Director at the Equality Trust and Mervyn Davies, Senior Advisor at Teneo and Former CEO of Standard Chartered; for a discussion about pay transparency and whether businesses can still look to recruit and pay the best talent, while maintaining public confidence in the fairness of that pay.

Capitalism is not serving everyone properly and needs to change. On this basis, Mervyn argued that the problem extends beyond CEO pay, to housing, austerity, public services and all salaries. Although transparency on pay, especially at the most senior levels in public companies, is actually relatively high, the culture of a company can become disconnected from reality, sending pay levels soaring. In the past, benchmarking led to a ratcheting up of pay and caused some salaries to reach astronomical levels, especially in the US.

Kudsia made it clear that it is difficult to address pay transparency without addressing how people make their money, and who isn’t getting their fair share of that money. Social mobility is crucial, and so is justice in terms of the same issues that Mervyn mentioned: housing, public services, salaries. The present system is stacked against working people who have protected characteristics. But pay transparency, pay monitoring, equal pay legislation and equal access to opportunity may help to undo generation after generation of inequality.

We do now see a much clearer and more granular picture of the inequalities inherent in pay. Through improved availability of data, it should be possible to better understand and itemise solutions. The global pandemic has blown the covers off inequality and presented an opportunity for something to be done about it – but this requires conscious action and political will. Action plans need to be put in place, Kudsia argued. 

The actions should include companies collecting and publishing their data – on BAME and disabled staff pay, representation, and progression. A full picture of what is happening to the people that work for every business is needed.

Wanda noted that the UK has been utterly dependent on key workers during the pandemic, although many of them were not recognised, valued or paid fairly. The prioritisation of profit has typically led to the squeezing of workers, but the past year has been an eye opener. The extended period of pay stagnation in the UK should give way to a period of greater transparency and ultimately an era in which the bar is going to rise, and the level of peer pressure that companies face over issues of social justice – including fair pay – will necessitate action.

Mervyn made this point very clearly; executives have got to embrace sustainability and fairness, right now. Not least because, as Wanda suggested, consumers will soon be empowered with a range of data points about the sustainability and social responsibility of a business before they make decisions to buy. This could happen through technology, specifically the use of apps that show the ESG implications of products there and then.

We now see inequalities more clearly; it’s a job for journalists and consumers to examine and call out discrepancies. A major risk is the amount of activity that’s moving into the private, unlisted space, becoming opaque and unscrutinised. 

We need to think about active interventions on skills and life-long learning, and ask if our approach to social mobility is fit for purpose. Alongside mental health and wellbeing, education in the workforce is a crucial factor in addressing the forces that drive unfair pay.

editor and invited experts

James Harding
Editor and Co-founder

Mervyn Davies
Teneo Senior Advisor, former CEO, Standard Chartered and Minister for Trade (2009 – 2010)

Wanda Wyporska
Executive Director, The Equality Trust

Kudsia Batool
Head of Equalities and Strategy, TUC