A Second Look

Too well off to be trusted

When the CEO earns by lunchtime on the first day of the working week what average workers earn in the entire year, then how can you expect them to trust that CEO ?

This question was posed by Global Unions General Secretary Philip J. Jennings addressing the World Economic Forum (WEF) recently concluded in Davos.

In his address to a WEF session on "Trust in Business", Jennings pointed out that CEO pay had sky-rocketed internationally while the rest of the economy stagnated.

According to him, in 2005 the average CEO pay was over 9 million dollars per annum, while the average worker earned just over 27,000 dollars. He also said that a recent Manchester University survey had concluded that in the USA and UK 'Executive enrichment is rarely justified by improved performance'. "From salaries to pension entitlements, CEO appetite for more seems to show no limits", Jennings said.

The above figures may vary from country to country. However, the disparity between the CEO's salary and the employees'; remains at a similar rate. In Sri Lanka as most businesses are modelled on the one's in the USA and what the Manchester University survey found out, could be applicable here as well.

Driven by the principle of increasing profits companies often resort to cut down over heads. One popular method of doing so is by reducing staff. We sometimes see company executives lament that their businesses are running at a loss. They often do so when they want to increase the price of their products or services, or when they want to get rid of excess staff.

The burden of unethically high salaries and privileges enjoyed by some top executives have to be borne by workers and consumers.

And when it comes to paying taxes companies never do it without complaining. This has resulted in the deterioration of the levels of trust in businesses all over the world.

The mission of a good company should be primarily to serve the end users of its products or services and to utilise a fair share of its profits towards improving the business which would enable it to pay better wages to the workers.

If this happens, we will see companies being trusted more by their workers and the public. It is vital to realise that eroding trust in businesses cannot be compensated by bragging about CSR commitment. In order to regain that trust company executives need to take a strategic approach towards improving a company's social image. But it shouldn't be merely a public relations exercise.

Addressing the same forum, Michael E. Porter a professor of Harvard Business School, USA, said companies haven't done a good job at building trust. "Only by working with stakeholders will trust be restored? Companies will have to go farther and show that they are actually serving the communities and doing justice to their workers, rather than fattening the wallets of executives," he said.

These comments should be taken seriously by our business community as the lack of trust between employers and employees often leads to damaging dispute hampering productivity.