About the report
We are in the midst of an important societal conversation about the ethics of pay, and in particular fair pay.
But what do we mean by ‘fair’?
Is fairness about equality or do those who contribute more deserve more? And is fair pay a corporate issue - or an issue for governments to solve using the levers at their disposal?
PwC asked over 1,000 senior executives about their attitudes to fairness and distributive justice in companies and society.
The objective of the study is to provide insights for organisations to engage with their workers and communities, as they build reward structures that are ethical, fair and meet employee, as well as wider societal, expectations.
Tom Gosling, Global Rewards Partner, PwC UK, talks through the report findings and looks at the different principles of distributive justice | Duration 1:33
Ways to think about fairness
Our study considers six different academic principles of fairness:
Key findings from the survey
Moderate principles rule
The four more moderate principles of Efficiency, Just Desert, Equal Opportunity, and Sufficiency, were the most favoured by a considerable margin.
Respondents typically favoured three or more principles this allowed us to group them into our fairness ‘tribes’.
People cluster into four tribes
PwC were able to identify clusters in the data where groups of like minded people take a similar perspective on the different dimensions of fairness. The data broke into four clear and broadly equally-sized clusters.
Idealist tribe:
- Distribution of wealth should lead to moral outcomes
- Key principles: Just Deserts, Sufficiency, Maximin
Communitarian tribe:
- All members of a community should have an income that is sufficient for them to lead a dignified life
- Key principles: Equal Opportunity, Sufficiency, Maximin, Efficiency
Free Marketeer tribe:
- If there are equal opportunities for all, talented people deserve to receive income in line with their contribution
- Key principles: Equal Opportunity, Just Deserts, Efficiency
Meritocrat tribe:
- Individuals are entitled to receive economic benefits because of their efforts and contribution
- Key principles: Equal Opportunity, Just Deserts, Sufficiency
It’s more complex than we thought - fairness is multidimensional
Respondents supported multiple principles simultaneously, even though many of the principles are in conflict.
This shows that attitudes to fairness are complex and multidimensional. A single principle cannot describe the richness of human attitudes. To develop an outcome that is seen as just requires subtle trade-offs across many dimensions.
Attitudes to fairness in companies and societies were strikingly similar
The idea that companies create wealth and societies distribute it did not seem right to this senior population. Companies are viewed as social entities in their own right, a microcosm of the distributional challenges faced at the level of society.
Universalism rules
Analysis shows that the data is remarkably consistent across a range of demographic dimensions. There were no significant differences by, gender, territory or earnings level. But this does suggests that the dimensions of fairness and the desired balance between them hold universal appeal.
But age does matter
One significant demographic predictor of which philosophy of fairness was most favoured: Age.
The under 40s were far more likely to part of the Idealists tribe than any other age group, and the over 50s were far more likely to be in the Free Marketeers tribe. This is significant in the current debate about intergenerational fairness between Gen X and Y and the baby boomers.
Unmet aspirations
Companies, as well as societies, are not always living up to people’s hopes of them. Typically, a quarter to a third of people feel that companies are not delivering principles of fairness that they deem to be important.
Our recommendations
Public and political debate on fairness is here to stay, and will influence public policy relating to the corporate sector. Companies should therefore consider their perspectives on this debate. The first step for each company is to figure out exactly what fairness means for them.
Boards need to translate the key principles of fairness into their own business, and decide which is relevant to them given their business, workforce, and culture. Different businesses will place different weights on the dimensions, which should be tailored to each company’s purpose, culture, and strategy.
Fairness principles will come alive through their expression in tangible people policies such as living wage adoption, pay-for-performance, worker security, equal pay and so on. Companies should identify the concrete policies that support their board-approved fairness principles.
Develop metrics that enable progress towards fairness to be measured and monitored, this can include objective outcomes such as equal pay statistics, social mobility in the organisation, pay ratios, market positioning, and so on. Developing a ‘fairness dashboard’ can help with accountability and reporting.
We have identified four common philosophies of fairness that people hold. The most appropriate fairness principles for the company will depend on employee attitudes and culture. Engage with employees to find out what fairness means to them and use the insight to refine company fairness principles.
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