Ahead of Lord Davies’s report on Boardroom equality, he will be somewhat alarmed by the survey results carried out by the Institute of Leadership and Management, which found that 73% of women felt that they still face barriers to top-level promotion. Quotas are a suggestion to break down this barrier. As Sheelagh Whittaker, a non-executive directive of Standard Life said:
‘I am a big supporter of quotas. I believe that we will only have true equality when we have as many incompetent women in positions of power as incompetent men.’
However, others say that quotas are not the answer, as they don’t actually change the fundamentals. Forcing compliance for equality in the workplace is not the same as equality in the workplace. There are a number of other reasons behind fewer women in top level positions, including less confidence and ambition, a more risk-averse attitude to promotion, as well as more women than men aspiring to run their own company, rather than seek promotion within a firm. So does discrimination still remain in the workplace or are there other explanations for the fact that only 12% of FTSE 100 directors are women?
Women still face a glass ceiling Guardian, Graham Dnowdwon (21/2/11)
Female managers say classing ceiling intact – survey BBC News (21/2/11)
The ‘glass ceiling’ is all in the mind: women lack confidence and ambition at work says new survey Daily Mail, Steve Doughty (21/2/11)
Women hit glass ceiling while report rejects boardroom quotas Independent, David Prosser (21/2/11)
Poll: Glass ceiling still a barrier The Press Association (21/2/11)
Men not to blame for the glass ceiling The Australian, Jack Grimston (21/2/11)
Questions
- How are equilibrium wages determined in perfect and imperfect markets?
- Is it efficient for a firm to pay men more than women or to hire/promote more men than women?
- Illustrate the concept of discrimination against women in the labour market. Think about the effect on the MRP curve and hence on equilibrium quantity and wage. How does this affect the MRP curve for men?
- What are the other causes of less women being FTSE 100 directors besides ‘the glass ceiling’?
- To what extent would a quota be effective in achieving gender equality in the workplace?
- Are there any other policies that could be used to tackle discrimination of any kind? What are the pros and cons of each?
Demand and supply determine prices, but when it comes to factors of production, such as labour, their ‘price’ is largely influenced by their productivity. This helps to explain why doctors are paid more than cleaners and Premiership footballers more than amateurs. But, can it really explain a £50 million transfer price for Fernando Torres, as he moves from Liverpool to Chelsea? Undoubtedly he’s a good footballer, but are his skills worth the price paid? The same question can be asked about David Luiz – a price of £25 million; Andy Carroll – a price of £36 million and a bargain price for Luis Suarez – a mere £23 million! How can teams, such as Chelsea afford to spend so much money, despite making a loss of £70.9 million in the year to June 2010? How much would they have lost had they not won the Premier league and the FA cup?
With the country facing the possibility of returning to recession and the trouble that Portsmouth FC found itself in last season, UEFA’s ‘financial fair play’ rules seemed like a good idea. But, they appear to have been thrown out the window. £200 million was spent on a handful of footballers, as libraries across the UK are shut down due to a lack of funds. The Premier League in the UK generated a higher income than any other, equal to £2.3 billion. However, 14 of our clubs made substantial losses. The amount owed to banks or the owners backing these clubs came in at a mere £3 billion. As the big clubs in the UK push up the prices, more and more ‘small’ clubs are being competed out of the market.
Torres makes record move from Liverpool to ChelseaBBC Sport(31/1/11)
Chelsea and Liverpool drive astonishing £134 million manic Monday Telegraph, Jason Burt (1/2/11)
Champions Chelsea report £70.9 million loss BBC News (31/1/11)
Chelsea announces 70.9 million pound annual loss despite winning Premier League and FA Cup The Canadian Press, Stuart Condie (1/2/11)
Financial restraint goes out of the window when the big clubs struggle Guardian, David Conn (1/2/11)
Questions
- How are the prices of footballers determined? Use a diagram to illustrate your answer.
- What factors explain why Premier League footballers are paid so much more than those in the Conference?
- What type of market structure is the UK football league?
- As prices are bid upwards, is there an argument that smaller clubs are being competed out of the transfer market? What type of market structure is football becoming?
- How is that Chelsea can make £70 million loss but still have the finance to spend £50 million on new players?
- What policies could be used to ensure lower prices are paid for footballers? Would they be effective and are they needed?
With government cuts and pay freezes, many people are worried about their future. Against this background it’s little wonder that people are growing increasingly resentful about the soaring pay of bankers and other leaders of major companies – especially when they reflect on the behaviour of top bankers who were largely responsible for the recession in the West and the debt problems that resulted. And the gap between those at the top and workers on average pay just goes on widening. As the final article below states:
The boss who sells Cillit Bang got paid a hefty £92.6m last year, while his counterpart who builds executive homes pocketed £38.4m and a top miner took home £27m. These are not figures from some international football league, but the bosses of Britain’s biggest companies, who received an average 55% pay rise in the year to June. A top FTSE 100 boss now earns £4.9m – 88 times the average worker’s pay.
On 9 November 2010, a high pay commission was launched to investigate the yawning pay gap between top executives and those on average incomes.
As the high pay commission, set up by the thinktank Compass and backed by the Joseph Rowntree charitable trust, begins its year-long analysis into the widening gap between the lowest and highest paid, a Compass poll shows that 99% of people believe that top executives are overpaid.
The commision will seek answers to questions such as the following: Why has the gap widened so massively? What is the role of globalisation in the process? Why has competition not worked to compete top pay down? Why don’t company owners impose more restraint on executive pay? Is there a form of collusion to push executive pay ever higher? Are executives worth it?!
Articles
Let’s make CEOs justify their wages Guardian, Martin O’Neill (19/10/10)
FTSE 100 bosses criticised as boardroom pay leaps by 55% Guardian, Simon Goodley and Graeme Wearden (29/10/11)
Investigation launched into soaring executive pay Guardian, Jill Treanor (9/11/10)
Eighty-five per cent of people say top executives ‘should be paid less’ Telegraph, Ian Cowie (9/11/10)
Top executives paid ‘far too much’ Financial Times, Nicholas Timmins (9/11/10)
A mission to the outer limits of pay Financial Times, Andrew Hill and Esther Bintliff (9/11/10) (first part of article)
Sharing the spoils of business fairly Guardian, Deborah Hargreaves (13/11/10)
The High Pay Commission
The High Pay Commission, home page
Questions
- Desribe what has happened to executive pay of the top companies over recent years.
- How are executive pay packages determined?
- How relevant is marginal productivity theory in explaining executive pay?
- What are the incentive effects of having extremely high pay?
- What scope is there for collusion in determining executive pay?
- Why don’t company owners impose more restraint on executive pay?
- What are the social impacts of excessive executive pay?
- What could the government do to address the problem?
’The steepest and longest recession of any developed country since World War II.’ This has been the case for Ireland, which has seen national income fall by 20% since 2007. Many countries across the globe have experienced pretty bad recessions, but what makes Ireland stand out is how it has been dealt with.
In the UK, the government has continued spending in a bid to stimulate the economy and to use Gordon Brown’s phrase from 2008, we have aimed to ‘spend our way out of recession’. Ireland, however, did not have that option. With too much borrowing, Ireland was unable to stimulate the economy and needed to cut its debts in order to maintain its credibility in the eurozone. Last year, significant cuts in government spending were accompanied by tax rises equal to 5% of GDP. Similar action is to be expected in the UK following the election, where popular benefits may have to be reduced, as transfer payments do account for the majority of government spending. Whoever is in government following the election will have some hard decisions to make and everyone will be affected. Read the article below and listen to the interview and think about what the UK can learn from Ireland.
Irish lessons for the UK (including interview) BBC Stephanomics (9/4/10)
Questions
- In the interview, Brian Lenihan said that the UK was expecting too much from the falling value of sterling. What was the UK expecting following significant depreciations in the value of sterling and why has that not happened?
- What is a deflationary spiral? Why has it caused Ireland’s public debt to rise so much?
- Why does Brian Lenihan argue that there are limits to how much taxes can be increased? What are diminishing returns to taxation?
- Would the UK be any better off had we joined the euro? What about other countries: would they have benefited had we joined the euro?
Throughout October we saw widespread strikes, from bins to the post and airline flights to buses – and it’s not yet over. (See article The Winter of Discontent: the sequel?) Last November, BA cut the number of cabin crew members, despite strike action, which delayed hundreds of flights. This issue has yet to be resolved and over the weekend, there were further talks to try to reach some agreement. However, no truce was reached and so further strikes are now expected. Indeed, the Unite union announced the results of another ballot of cabin crew, showing even larger support for strike action.
However, BA is not the only airline facing strike action. Some 4000 pilots at Lufthansa, a German airline, called a four-day strike, following disputes over job security. This has led to thousands of flights being cancelled and thousands of passengers left stranded. Although the strike was suspended after one day, the dispute is not settled.
The stimulus for this action appears to date back to the huge turnover that Lufthansa made in 2007, with pilots feeling they should have a share in this success, along with its recent purchase of Austrian Airlines and the need to turn this into a profitable enterprise. The Lufthansa pilots are concerned that foreign pilots will be brought in to replace them in order to reduce costs. The airline fears that this strike could cost them about £21.9 million per day. With both sides unwilling to yield, it looks as though many passengers may find themselves stranded for a bit longer.
Articles
Questions
- How effective is the strike action by Lufthansa and BA likely to be? Which factors affect this?
- With a huge turnover in 2007, why were pay cuts at Lufthansa felt to be necessary by the company?
- How would wages be determined in the airline industry without trade unions? Illustrate this on a diagram and use that to explain why some workers get paid more than others.
- On your diagram of wage determination, now illustrate the effects of a trade union entering the market. How are wages and the equilibrium level of employment affected?
- Other than striking, what other options do workers and unions have?
- If strike action is costly to BA and Lufthansa, why don’t they simply agree to the unions’ demands?