Asking for less

November 8, 2011 § 7 Comments

David Cameron has been making lots of supportive noises about female membership of executive boards. Last week, hit by the news that executive pay saw a sharp increase last year, Cameron suggested that the “women on boards” plan could also help to address excessive pay. The boys club atmosphere of senior executive circles allowed men to keep on paying men more, he suggested, and a larger female presence would somehow cut through this and help to restore measure and balance.

But how exactly does the Prime Minister think the presence of women will curb pay?  The Financial Times, looking for experts, found little expert evidence and one person who was willing to say that “women ask for less than men.”

Is this the way the curbing will work? Because women have been trained to ask for less than their male colleagues, their influence will mean everyone gets a bit less greedy?

There are some real problems with this. Though many people might agree that (mainly male) top executives demanding very high pay is wrong, it doesn’t follow that women demanding less is right. Women asking for less money is not an indication that women are less acquisitive or more measured than men, but that they have been trained – really, throughout our entire financial history – to think they should have less. Women have always been paid a smaller amount than men; they still are. They ask for less out of habit, fear, lack of self-esteem – but mainly because that’s the way it has always been and it is difficult to break through in every area, and to fight all the time. Women may have agreed to do top jobs at lower salaries because, in trying to achieve equality, status is more important than money. That doesn’t mean money isn’t important to women.

There is a second possibility. It is possible that with more women on boards, the average pay will go down: because the women will be paid smaller salaries than male colleagues doing a very similar job. Since this currently happens in almost every arena of professional life, it wouldn’t be surprising to find that it continued even after more women entered boardrooms. David Cameron’s plan might work in this way – will that be a triumph?

David Cameron seems to think he’s giving women a compliment, by propounding the idea that they will morally shame or wisely advise their greedy male colleagues. What he’s actually doing is counting on a historical inequality to solve a problem he should be addressing via policy.

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§ 7 Responses to Asking for less

  • Ed Lake says:

    Without wishing to defend Cameron, I suppose another possibility is that by increasing the supply of boardroom talent relative to demand, you drive down the price. Perhaps that’s what he had in mind. Not sure it would work in this case, though.

    • But is there really currently a lack of talent? There’s a lack of women; but there have also always, presumably, been talented women out there who could have been on boards. The (mainly male) talent supply has so far, it seems, had the effect of driving the price up. Cameron seems to be implying that bringing the price down is something women are better at.

  • Ed Lake says:

    The whole premise on which high boardroom pay is meant to be justified is that it’s worth the money: that market scarcity means there’s a lot of competition for talent, and that if you don’t pay the asking price you get a weak board and your business fails. The rising rates of executive pay supposedly roughly tracked increases in market capitalisation for public companies between 1980 and the mid-’00s, which some people think supports this theory. That’s where the price hikes were meant to come from: basically, a superior model of MBA-certified boardmember, issued in limited editions, so companies had to pay through the nose or be left behind.

    If this story is true it’s easy to see why expanding the pool of talent by adding women to it should drive down prices, even if the women are just as greedy as the men. Perhaps increasing the intake at Wharton or wherever would have the same effect. But is it true? There are plenty of economists who endorse it. (A lot of those economists teach at business schools, of course.) To me, it sounds like nonsense. Regardless, Cameron himself seems to support it, and so by his own lights the women-on-boards plan should work without any sexism being necessary.

  • KK says:

    Also without wishing to defend Cameron, or lower pay for women: I thought what he meant was that since women already make less than men, they’d have to be given an even bigger jump in salary when hired onto boards in order to be paid as much as their male counterparts. And since this would be unlikely to happen in the current climate, board pay would gradually go down as more women were hired.

    • opendor says:

      Ed, I understand the premise – but the pool is not being expanded by adding women; women have always been there. It’s good that Cameron is championing women on boards. But by suggesting that this will help solve the pay problem, isn’t he suggesting that what’s being ‘added’ is cheaper workers rather than more competition?

      And KK, maybe this would be the effect of adding more women to the mix. But isn’t that kind of ironic; the boards only get around to hiring women at the point where no one gets well paid any more? I’m exaggerating – but it’s frustrating that women being paid less is being taken as a given – I know it’s true, but that’s not the same as it being right!

  • Ed Lake says:

    It’s a controversial question whether women are available (or “made available”, as Cameron cryptically says in the Guardian piece) for boardroom jobs. In a sense I’m available for a boardroom job. In a more important one I’m not: there are good reasons why I won’t be considered. A rational-markets zealot would say that clearly women aren’t available in the relevant sense either, the proof being that there aren’t many women on boards. Then the explanations would be all the well-rehearsed ones about women choosing career paths that don’t lead to the boardroom or leaving the workforce before they become eligible (or lacking killer-instinct and maths skills, if you’re talking to a moron).

    I do think Cameron’s statement is obscure, so he could have all sorts of things in mind. How does he intend to get more women into boards, for instance? Affirmative action tax breaks? Cutting maternity provisions? More likely, he doesn’t seriously plan to do anything aimed specifically at women and it’s all just something he said because the Tories are losing female support. Regardless, the premises necessary to resist your charge of sexism are conveniently to hand within his ideology, however fantastical and dishonest that whole edifice might be. God, I’ve bollocked on. Hello you both.

  • Andrew says:

    Nick Watt:

    Nick Watt from The Guardian. A question for Prime Minister Gillard and a question for Prime Minister Cameron please. Prime Minister Gillard, you’ve been involved in discussions about the Royal succession. Can I ask you do you think that the Queen will be the last unelected Head of State in Australia? If that is the case, can I ask you how you personally feel about that given that you were born as a subject of her Majesty in the United Kingdom?

    A question to Prime Minister Cameron, there’s a report today saying that executive pay has risen by 49 per cent back in Britain. There’s also another report in The FT which says that civil service bonuses have increased by £4 million. Can I ask you how you feel about those, given that obviously, you’re central message is belt-tightening? Can I ask you what do you feel about the High Pay Commission, Deborah Hargreaves, talking about the closed shop of remuneration committees, sitting around sorting out their own pay? Do you agree with Vince Cable that the time has come for specific action on this?

    Julia Gillard:

    Well if I can canvas my personal history I’m the daughter of a man from a Welsh mining village. I’m the daughter of a woman whose maiden name was McKenzie and I’ve lived in Australia since I was four years old. So I am an Australian. So any of the perspectives that I bring on questions about our constitutional arrangements I bring through the eyes of being an Australian. You don’t get an accent like this, from being anything else.

    Ultimately, I think the Australian people will work their way through changes to our constitutional arrangements, but there is not a great deal of focus on this in our current, national discourse. We did have a Republican referendum some time back and I think it is fair to say that in contemporary times there is less focus on the issue than there was back then. The Queen has certainly been received with a great degree of affection on this visit. Literally, thousands of Australians turning out to see her wherever she’s gone. So there is a sense of personal connection with the Queen which has been very on display and I’d have to say a sense of excitement about the young Royals as well.

    David Cameron:

    Thank you. This is a concerning report, particularly at a time when household budgets are very tight. When people have difficult circumstances, the increase in food prices and fuel prices. Six million public sector workers on a pay freeze. So it is an issue of concern. Let me take you to the three parts of your question. First of all on public sector pay. I believe this Government has actually led by example. All ministers coming in to this Government accepted a five per cent pay cut and a freeze for the whole of the Parliament. We are trying as hard as we can to apply the concept that people shouldn’t be expecting to be paid more than the Prime Minister. That has actually had quite a downward thrust on a lot of jobs in the public sector and also right through local government, where you can see a number of local councils now cutting the pay of their chief executives.

    o I think, actually, the public sector is giving a lead from the top by example. The second point you raised about the closed shop, about remuneration committees. This has been a problem. There’s no doubt about that. One of the things we’re doing and it’s becoming a bit of a theme today about the empowerment of women, is making sure that there are more women non-executives on boards. I think at the moment there’s too much of a closed circle of the people made available to be non-executives and by opening this up, by increasing the number of women on – in our boardrooms, I think that will have a beneficial effect.

    In terms of executive pay more generally, I think there are three important principals here. Transparency, accountability, responsibility. Transparency, we need all these figures published. All these figures known, so that you can compare and contrast. So that shareholders know what they are paying for. You need accountability so that is to strengthen the hands of shareholders. So that they feel that they are taking responsibility for remuneration in the boardroom. I think that is important.

    But above all there is responsibility. I think boards have got to think, when they are making pay awards, is this the right and responsible thing to do? Of course, you’ve got to attract the best talent to run the business that you are accountable for as a non-executive director. But is what you are doing responsible? Many organisations do now look at the multiple in terms of the lowest paid in an organisation and the highest paid in an organisation. I think everyone whether they’re in public life, whether they’re in private enterprise, they’ve got to be able to justify the decisions they make about pay.

    So I welcome the debate about his. I welcome the transparency. I want to see proper accountability. I believe in a responsible society and that is responsibility exercised by everybody including in the boardroom.

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