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Shel Holtz
Communicating at the Intersection of Business and Technology
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Here’s why your company could suffer terrible PR if it doesn’t narrow the CEO-worker pay gap

Here’s why your company could suffer terrible PR if it doesn’t narrow the CEO-worker pay gap

Income Inequality
Flickr photo courtesy of mSeattle
The importance of a genuine commitment to corporate social responsibility is growing more and more clear. Study after study finds consumers are making conscious decisions to avoid doing business with bad actors and greenwashers, and to spend their money (and make their investments) in companies that are sincere about trying to do well by doing good.

Several companies are taking the new reality seriously, incorporating their CSR efforts into their annual reports and taking other steps to make sure the public is aware of their activities. It’s not enough yet, though, to change general public perception of corporations, which is deeply cynical in the developed world, where only 52% of people have a favorable view of corporations.

The Burston-Marstellar/CNBC poll also found that 60% of the public in developed economies believe CEOs don’t give a damn about income inequality because it means they, the CEOs, are getting richer. What’s worse, 56% of C-suite staff also agree with that statement.

The current situation

According to the Pew Research Center, income inequality in the U.S. is the highest it has been since 1928. In 2012, according to a Pew report, the top 1% of earners in the U.S. acquired 22.5% of pretax income; the 90% at the bottom divvied up 49.6% of all available pay. Since 1978, pay among American CEOs has risen 725%, more than 127 times faster than the 5.7% growth in worker compensation. The gap between CEOs and the average American worker in 2013 was 331-1; one report said the average CEO took home $11.7 million while the average employee earned $35,293. Reports suggest that retention-conscious boards will continue the trend with higher CEO bonuses this year, even among leaders who haven’t performed well.

While income inequality has become a political hot potato—the right doesn’t think it’s a big deal while the left sees it as the end of the world—companies that demonstrate they’re doing something to level the playing field could boost their reputation and attract business from the growing number of socially-conscious consumers.

For example, Nielsen found in a 2012 study that “two-third (66%) of consumers around the world say they prefer to buy products and services from companies that have implemented programs to give back to society. That preference extends to other matters, too: they prefer to work for these companies (62%) and invest in these companies (59%).”

Regulators step in

Taking steps to close the CEO-worker pay gap could be even more visible to consumers than it otherwise would be, with the U.S. federal government signaling it may step in to address the problem. Business advocates routinely argue that business should be left to self-regulate; government tends to take action when business fails to do what it says it will do. Consequently, the U.S. Securities and Exchange Commission (SEC) has proposed new rules that would require U.S. corporations to disclose the gap between their CEO’s pay and that of their workers. Efforts to introduce this kind of disclosure have failed at the shareholder level.

The proposed rules are being championed by activitsts and unions, according to Reuters; these organizations would undoubtedly would use their social media and other communication acumen to draw attention to the worst offenders (like this.

I won’t take a political position on income inequality on my blog, which is focused purely on communication. (I’m much more open about my political views on Facebook, if you’re interested.) But just as companies have found it prudent to make genuine investments in sustainability, income equality is poised to become the next CSR issue to inspire corporate action.

The PR advantage of narrowing the gap

By reporting on steps your organization is taking to close the gap, and profiling employees who are benefiting from these efforts, you could position your company as one that socially-conscious consumers will want to invest in and do business with.

In other words, regardless of your leaders’ political views on income inequality, closing the gap could become the right thing to do for the business, and a focus of PR efforts to raise awareness that yours is the company for that increasingly influential socially-conscious consumer. And companies that already have lower gaps—like 3M (98:1), Pfizer (60:1), Flour (56:1), HP (6:1), Occidental Petroleum (22:1), Kraft Foods (30:1), UPS (28:1) and the like—can make hay right away with their own numbers.

You can check the gaps among 90 or so top U.S. companies at Payscale—which is also freely available to all those prospective customers, workers, and investors your company would love to have.

It’s a huge step, I know, but your company may well have to make it sooner or later. You can get the PR benefit by making it sooner.

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