Where to draw the line?

Yesterday (Tuesday 6 August 2013) the UK news outlets were buzzing with a story by The Telegraph suggesting that the Chief Executives of some of the UK’s top International NGOs were overpaid. Sir Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations, spoke about the need to provide an adequate wage in order to attract quality candidates to the job on BBC Radio 4.  In addition, these top managers  carry enormous responsibility – Barbara Stocking, ex Oxfam GB Executive Director defended her wage explaining that she had to manage a national retail agency (Oxfam shops), the kidnapping of staff members and the lives of thousands of poor people worldwide.

Marc du Bois, MSF UK’s Director, tweeted his salary for 2013 – £71,500 – following this morning’s debates. Some suggested that transparency about salaries might help us feel more comfortable with the amount that these chiefs were being paid but much of the information can already be found in public annual reports. Plus even if it was plastered across buses, transparency about a £1 million wage package for anybody would make me feel uncomfortable.

The amateur economist in me believes that these problems should be solved by the market. A simple demand and supply equation: what are the organisations willing/able to pay and what quality of CEO can that amount buy? But this creates a further problem, namely who should decide what money is available to pay the wages of the CEO? Is it up to the trustees? The beneficiaries? The donors?

It would be interesting to follow private giving flows to those large NGOs named in today’s news stories. If the general public that supports these agencies disagrees with the CEO’s wage then one would expect to see a withdrawal of monthly donations over the next three months by disgruntled or dissatisfied supporters. It is less likely that private companies would withdraw money due to a disagreement with the total wage package – though they may pull out of partnerships due to the danger of bad press coverage. Foundations and trusts provide an interesting case to study of how donors approach staff pay within their grantees. Their donations are usually more tailored and would include a percentage for admin costs, so they have technically already engaged with the debate.

Current private giving flows are not public in a real time sense so we may not be able to track this information to conclude, how big a packet the donors believe is available for paying the ‘top dog’. It might make for an interesting research project for an insider though . . .

If we aren’t able to generate the answer through a demand and supply machine, then we will have to decide what is ‘reasonable’ by some other criteria. Ethics? Moral beliefs about what is right and what is wrong or how much is reasonable and how much is scandalous do not provide us with a strict framework to base decisions on. For instance, is it ok to pay a CEO of a charity £58k? Sounds fair. Is it ok to pay a CEO of a charity £258k? No, that’s unreasonable. Is it ok to pay a CEO of a charity £105k or £89k? Not so easy . . . Where do we draw the line?

Perhaps by unpacking the reasons why large wage packets could be deemed unreasonable for the Chief Executives of aid agencies we can begin to unpack these intuitions. Firstly, any money spent on the wages of staff is no longer available to spend on the ‘cause’. Yet, without staff none of the money accumulated for said cause could be distributed, let alone monitored or evaluated. Second, such large pay packets contribute to the unequal society that many (not all) of these aid agencies are supposedly fighting against. This is only a relevant argument for those who believe that inequality is a central problem and not to those who believe we should just be focusing on removing absolute poverty (which is all relative anyway . . . . future post). Thirdly it concerns us that these ‘top dogs’ might be doing the job for the wrong reasons: to benefit themselves, or their families. Why does someone who cares so much about the poor need over £100k a year?

This is an interesting point. As a middle income aid worker (i.e. I’m not poorly paid and I’m certainly not well paid), I would like to think that I’m working in a sector where there is potential for me to grow and reach exciting heights. My peers all earn over £50k already so it would be strange for me to accept a ceiling of that very same amount for the remainder of my career. I like to dream of having a family, living in a nice house, going on holiday to warmer climes, paying for my children to go to ballet or to play the saxophone etc. But how much does this all cost? If a CEO has two or three children and a partner who also works, then they need to cover the costs of childcare. If they are travelling a lot for work, then childcare may need to include overnight cover and even weekend cover too. Could we add up how much it would cost to live a reasonable life where our children are able to take the opportunities around them and then use that to establish a ‘reasonable’ wage?

There are lots of variables involved, but it would quickly show us beyond what point people are beginning to spend their money on luxury goods or items rather than daily life. Perhaps that is where we draw the line? But whose expectations do we base it on? Those who want to send their children to private schools, summer camps and exotic holidays or those who are content with state schooling, camping holidays and staying with your grandparents? Like everything, the problem is that ‘reasonable’ is a relative concept.

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