Wealthy company owners at risk of ruining their personal reputation by ignoring pay gaps, finds new national survey
Business owners, investors and family office principals are putting their personal reputations at risk by not taking steps to narrow pay gaps in their companies, according to a new national survey.
Surprisingly, older generations think significantly worse of company owners presiding over companies with high pay gaps than young people – meaning these results cannot be explained as changing Millennial cultural attitudes.
The new survey found that more than 63 per cent of the UK public would think worse of the wealthy owner of a company if they found out that one of the businesses in their portfolio had a poor gender pay gap. Similarly, 58 per cent per cent of people would think worse of a company owner if one of their businesses was perceived to have unfairly large pay differentials between entry-level employees and executives.
While studies have previously found that large pay differentials can damage a company's reputation, this is the first time that pay differentials have been shown to have an impact on the reputation of a company's owners, shareholders and investors themselves.
The results underline the need for private company owners, including individuals, investors and family offices, to regularly audit the pay-gap and wider social credentials of their investments if they want to protect their reputations – and not see themselves simply as passive investors who are insulated from the impact of the social credentials of their investments.
The survey was commissioned by Transmission Private, a public relations firm that advises private clients, shareholders, executives, family offices and entrepreneurs on communications and reputation.
Luke Thompson, a Partner at Transmission Private, says: "Private company owners are becoming much more highly identified with their businesses and investments. This is something we have become increasingly aware of over the last few years.
"When an individual or family office invests in a business, their reputation becomes entangled with the reputation of that company. They need to take an active interest in the company's ESG and CSR credentials, and think about the implications for the family and their personal reputations."
Surprisingly, the survey shows that older generations care more about pay differentials than younger people. In particular, 39 per cent of under 25-year-olds said that they would think worse of a shareholder if they discovered that one of their businesses paid its junior staff significantly less than its executives – but a massive 72 per cent of people over the age of 55 years old said they would think negatively of that same shareholder.
The statistics deal a blow to the idea that interest in pay differentials is only a matter of concern amongst Millennials, which may not impact company owners with a less youthful target audience. The older generations also care more about the gender pay gap. 55.45 per cent of under 25-year-olds would think more negatively of a shareholder whose companies have a poor gender pay gap versus 64.7 per cent of those between the ages of 45- and 54-years-old and 68.9 per cent amongst over 55s.
Luke Thompson, a Partner at Transmission Private, adds: "There is sometimes a mistaken perception amongst shareholders, company owners and family offices that concern about the gender pay gap and the pay gap more generally is something that is unique to younger people.
"This has led some businesses who think they are perhaps less exposed to younger consumers to dismiss these issues as concerns only for trendier, fashionable companies. In fact, this research shows that the very opposite is the case.
"Older generations are a lot more likely to judge shareholders negatively if a company performs badly on pay gap metrics. This may be because younger people have spent less time in the workplace and have been less exposed to pay divides."
Finally, women were more concerned about pay gaps than men. While this might be expected when it comes to the gender pay gap, this trend also applied to the pay differential between junior staff and executives.
63 per cent of women said they would think more negatively of a wealthy business owner of a company that ranks poorly for how it pays its base-level employees compared with its executive employees. This figure was nearly 10 percentage points lower for men at 52.27 per cent.
The survey left it up to respondents to determine what they thought it meant for a company to perform poorly on either the gender pay gap or the pay gap between junior staff and executives more generally.
Jordan Greenaway, Managing Partner at Transmission Private, says: "While the results shine a light on the importance of the pay gap for reputation, closing the gap will be very difficult, or even impossible, for some companies.
"Regardless of the state of play, shareholders must take more concerted steps to ask their companies and investments for up-to-date CSR, ESG and pay-gap metrics.
"In a world where data is increasingly available at the fingertips of the public and other stakeholders, it is a mistake to believe this data can be either disregarded or ignored.
"If a company's pay gap data looks poor on paper, shareholders must understand what is going on, and take the time to contextualise the information for the public. This is essential for managing perceptions and safeguarding a shareholder's reputation."
The poll was conducted by OnePoll, which is a member of ESOMAR and employs members of the MRS. The poll covered a nationally representative sample of 2,000 people.