Fairly widespread anecdotal evidence exists that co-operatives and other forms of more democratic business tend to have lower pay ratios between their highest and lowest paid employees. And yet it is surprising that the co-operative movement does not seem to make more of this ethical edge, not only to promote the values of the movement, but also to generate business advantage in terms of attracting more customers and investors to its inherently fairer business model.
There is now a growing interest in the UK and abroad around the reporting of pay ratios as a means of addressing inequality – both in terms of pay and in a wider sense. In the US, there has been legislation passed in the Dodd-Frank Act to provide for top-to-median pay reporting by large listed companies, while in Canada, the Wagemark is used by companies, non-profit organisations and government agencies to certify that the ratio between their highest and lowest earners is competitive and sustainable. New initiatives are also developing in the UK, such as Pay Compare, which seeks to bring transparency to UK pay ratios across all sectors of the economy.
We know from recent British Social Attitudes surveys that people do not like inequality or large pay gaps within companies and, given the choice between regulating fairness through governmental tax and spend policies or via the workplace, they seem to favour the latter.
It is worth re-stating here that pay inequality in the UK is driven by the private sector. Pay ratios in the largest FTSE 100 companies are around 1:262 on average. For the public sector, it is around 1:15 on average and in the third sector it is more like 1:10. Co-operatives operate mostly in the private sector. Together with employee-owned businesses and mutuals, there is a chance here to shine a harsh, comparative, light on the unfair pay practices that abound within many (usually larger) private sector shareholder-owned companies. The ultimate long-term goal here is to challenge the iniquitous pay situation that has developed in many parts of the private sector and which drives the UK’s high and damaging level of inequality.
So, I would like to suggest a three-point plan which could be used by the co-operative movement to give it a leading role in addressing pay and wider inequality in the UK:
1. All co-operatives should publish prominently, on their websites, in their published accounts and elsewhere, the pay ratios between the lowest and highest paid individuals, and between the median and highest paid.
2. All co-ops should also provide this ratio information to Co-operatives UK for it to collate and use at a national level to promote the ethical edge that the co-operative movement has in terms of greater pay equality.
3. Co-operatives should also provide their pay ratio information to the Pay Compare website to gain further exposure and to display, proudly and publicly, the Pay Compare mark so they can show the rest of the world that they are leading by example.
Following the crisis at the Co-operative Bank, taking a lead on pay ratio reporting presents a great opportunity for the sector. There is no doubt that the wider co-operative brand has been unfairly damaged by the debacle – but by regrouping and becoming an exemplar on pay ratios, the movement can visibly live and practise its values of equality, democracy and openness as an encouragement to others.