#ESG50 is the solution to the pay scandal

Pay gap

 

 

 

 

 

“Pregnancy is a sign of wavering commitment,” writes Suzanne Moore in The Guardian (6 Apr) in a piece about “the structural inequalities in the system”.

I believe that her accurate assessment will not be corrected unless and until Environment, Society and Governance (ESG) issues are given equal ranking with Return on Investment (ROI) issues.

The current backlash against inequality is rightly focused on mobilising against pay injustices including, what Suzanne Moore calls, “socialisation, what we think we are worth, and how we ask to be paid”.

But this will not be sufficient to bring about a fundamental shift in attitudes which requires the full integration of family life into business decision-making because it’s right, and not because it might be good for business or compliance reasons.

Why should any business thrive at risk to the environment, society and good governance? Equally, why should an investor risk their capital without reasonable incentives to do so?

These two forces are interdependent. Without families, there would be no customers, employees or organisations. Without risk-capital businesses would not exist.

The current model is no longer fit for purpose. Business decision-making will have to move towards a 50% ROI – 50% ESG model if the backlash from those forgotten is not to create bitter conflict.

There are signs that sentiment is moving towards an #ESG50 model. For example, Harvard Business Review gives a 20% weighting to ESG factors in its Top 100 CEOs rankings. I presented a paper on this point at The University of Bologna last month.

I wonder what their rankings would look like if HBR recalculated them using a 50%, instead of 20% weighting, for ESG factors?

That would be a fascinating exercise. Which CEOs would move down or up the list? And what would it chase out about pay inequality issues?

You can download that paper here.

 

Ciarán Fenton

Board Effectiveness Consultant

I help directors on boards relate better: with themselves, colleagues and organisations

 

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