By Mara Lilley, Senior Campaigns Officer
68 CEOs in the FTSE 100 earn more than 100 times the average UK worker’s salary, while almost four million (1 in 8) workers in the UK are living in poverty. How many of these business leaders have gone into the New Year with a resolution to address this disparity? Though the causes of in-work poverty are complex – with state structures, institutions, the market, an ineffective benefits system, and individual circumstances all playing their part – side by side, these figures are baffling and shine a light on some of the stark economic imbalances in the UK today.
Although UK employment rates have risen, they are still lower than they were a decade ago. At the same time, the UK’s productivity continues to decline or flat-line. There is also a concerning high number of precarious roles which are often concentrated within the lowest paying sectors in the UK.
In September 2018, the IPPR Commission on Economic Justice called for fundamental reform of Britain’s economy, finding that “the UK is being held back by a business culture dominated by decades of short-term profit taking, weak levels of investment and low wages.” This was shortly followed by a report issued by the UN’s Special Rapporteur on extreme poverty and human rights which chastised the government’s “punitive, mean-spirited and often callous approach” to poverty in the UK. In December 2018, JRF called for reduced housing costs, a strengthened social security system, and better-paid employment to reduce the number of people swept into poverty.
68 CEOs in the FTSE 100 earn more than 100 times the average UK worker’s salary, while almost four million workers in the UK are living in poverty
From an investor perspective, the status quo calls into question to what degree businesses are embedding social, environmental and governance (ESG) responsibilities into the heart of what they do. Failure to take these factors appropriately into account has serious negative repercussions for workers and their families, and it also creates, drives and underpins a range of financial risks. This is bad news for institutional investors for whom long-term and sustainable returns from investee companies are vital.
As investor understanding related to the financial materiality of the quality of work and company labour practices gains more depth, interest in workforce policies and practice is on the rise. Also, increasingly more and more investors are motivated by the moral case to act: that this is the right thing to do and that business success can be delivered on a stakeholder model that benefits workers and society as well as shareholders.
ShareAction – with the support of JRF and Trust for London – recently published an investor briefing called Influencing UK Workforce Practices through Responsible Investment. Not only do we want to strive for 100% Living Wage accreditation across the FTSE, but we also need companies to demonstrate leadership on a range of workforce practices. If we want to see systemic change for the better, improvements are necessary across the board – from tackling endemic levels of modern slavery, breaking down barriers to freedom of association, increasing worker representation, addressing the rise in precarious jobs, to ensuring fair pay and equal opportunities for all.
Investor engagement and shareholder activism can reprogramme the economy for the creation of safe and prosperous communities supported by good, fairly-paid jobs.
Ongoing and better-aligned corporate engagement by investors has the potential to drive significant progress within publicly listed companies in the UK. Now is the time to develop opportunities for strategic collaboration and ramp up broad-based engagement on common themes that affect UK workers. In 2019 ShareAction will be exploring how to build on our long-standing Living Wage campaign to do just this. Investor engagement and shareholder activism can help to reprogramme the economy for the creation of safe and prosperous communities supported by good jobs. And the work’s already begun.
Thanks Mara! To find out more about our current Living Wage campaign, click here.