Fair dues: Harnessing fairness to win back trust
Despite years of effort, financial services companies continue to face a damaging trust gap that makes it harder to connect with customers and sustain their loyalty. Creating a fairer pay structure could help your organisation to re-engage with customers, employees and society as a whole.
Flatlining incomes and rising inequality are shining an unwelcome spotlight on industries seen to be exacerbating the problem. Financial services is one of the sectors in the firing line. The rewards enjoyed by senior executives and high earners within financial services have come to epitomise what many people see as an industry that’s cut off from everyday life – ‘Wall Street versus Main Street.’ And this spotlight is being intensified by new gender and pay ratio reporting.
Although many financial service organisations have been working to reshape their cultures, deliver customer outcomes and publicise their contributions to society, public anger over pay is undermining the industry’s efforts to reconnect with society.
Yet the focus on pay presents an opportunity for your financial service organisation. Putting fairness at the heart of your pay policies would visibly demonstrate that you’re conscious of inequality and its impact – that you’re listening to what stakeholders are saying and you’re prepared to align with their values. Ultimately, embracing fair pay would establish that you’re prepared to ‘walk the talk’ in reshaping your culture, organisational purpose and performance objectives.
The risk of inaction is being forced to respond to a fairness agenda set by hostile interest groups. This could include allowing ‘fairness’ to become synonymous with ‘equality,’ which in turn could lead to arbitrary caps on salaries or pay ratios.
Questions remain over whether enough financial services organisations are moving far or fast enough to set their own agenda on fairness, rather than having it shaped externally by regulation.
As the disclosure demands and the potential backlash increase, there is a danger that your company will be judged by a definition of fairness set by others or by how the disclosures are framed. It’s important to develop a clear view of what dimensions of fairness are relevant to your business and how you communicate them. Is it about closing the gap between top and bottom? Or making sure pay is always nondiscriminatory and justified by performance and contribution? Is fairness defined by the market rate, or are there minimum standards that dictate a living wage should be paid regardless? The answers will be different for different organisations and need to be supported by clear and proactive fairness reporting, which explains how fairness is viewed and measured, sets out plans to achieve these aims and tracks progress against objectives.
The risk opened up by a reactive, minimal compliance approach is that a company will be held hostage to a one-dimensional view of pay and by extension its fairness philosophy will be based on its pay ratio and gender pay gap alone. This can hurt a company’s reputation and limit its ability to keep and attract talent.