Amy Lyman -
August 14, 2012
Is Money the Only Currency of Value?
Money is supposed to represent an exchange mechanism. Money allows the people who have it to exchange it for something else they might need or want. For many people their ability to exchange money for things they want is quite limited because they only have enough to exchange for the things they need – food, clothing, shelter – pretty basic stuff. The things they want – health insurance, savings for their future, free time – are out of reach. Even though many of us consider these to be basic human needs, for others they are simply ‘wants’ that they can’t have.
The oft-quoted line about a company’s only responsibility being to make money for shareholders is used in a roundabout way to justify the pay packages of senior executives. The argument goes that the important leaders at the top would leave if they didn’t get the pay packages they do, the companies are making money for shareholders, therefore the pay packages are justified.
Is anyone challenging this round-about executive pay argument? I think so. Among the 100 Best Companies, 70% of employees believe that they receive a fair share of the profits made in their organizations, and 77% believe that people in their organizations are paid fairly for their work. This data is from anonymous employee surveys administered for the 100 Best Company selection process from 2004-2012.
For comparison, we can look at the responses from employees in the Lower 100 companies – good companies who apply for the list, yet don’t make it. These are companies in which many things are working well, senior leaders are showing an interest in improving the quality of the workplace and employees are treated with a level of respect still missing in many workplaces. Yet perceptions of fair pay are not as high for people who work in the Lower 100 companies as among the 100 Best. Specifically, 49% of employees believe that they receive a fair share of the profits made by their organizations and 62% believe that people are paid fairly for the work they do.
Does it matter? I think so. We know that the publicly-traded companies on the 100 Best list significantly outperform their peers. From 1998 to 2012 – looking at the entire history of the 100 Best list as published in Fortune magazine - the Best Companies have achieved an annualized return of 10.32%, while the S&P has achieved an annualized return of 3.71%. The 100 Best are doing a significantly better job of making money for their shareholders.
When we look at the performance of the 100 Best and the Lower 100 we see similar differences though not quite as stark. From 2004-2011 the 100 Best achieved an annualized return of 14.97% while the Lower 100 have seen an annualized return of 9.88%; a notable difference in performance that many company leaders claim to be trying hard to achieve.
So is money the only currency with value? I think not. I believe that ‘fairness’ is a currency of tremendous value that is too often ignored. People looking to run profitable companies – Boards of Directors, CEOs, senior executives, venture fund managers, entrepreneurs – would be wise to look at how well they understand and utilize the currency of fairness in their organizations.
If you are a Board member, especially one on the committee concerned with executive pay, and you are looking to uphold your fiduciary duty to shareholders then you absolutely need to be well versed in how the currency of fairness is distributed throughout the organization. The information cited above is public knowledge and has been for a long time. The publicly-traded 100 Best Companies make more money for shareholders and more people who work in those organizations – from hourly clerical up to senior executive - believe that they are paid fairly and receive a fair share of the profits than in other organizations.
Read the Results of a Recent Deloitte Survey for more insight into what really affects workplace culture.Amy Lyman is co-founder of the Great Place to Work® and researcher/writer. Her current focus is on the key contributions of Trustworthy Leaders to the creation and support of successful groups and organizations.