124 / Rotman Management Spring 20 19
environment as new technologies make our systems more
efficient, effective and stronger. For example, artificial-in-
telligence algorithms derived from big data only reinforce
the biases that are baked into old ways of doing things,
because all data is about the past.In your work you have argued that four sets of contempo-
rary practices increase inequality. Please describe them.
In the paper you are referring to (co-written with John Amis,
Kamal Munir, Tom Lawrence and Paul Hirsch), the four
practices are shown to be compensation arrangements, divi-
dend payments to shareholders, avoidance of tax payments,
and philanthropic choices. But, as we reported, the first of
these, compensation, has the biggest direct impact.
With the emphasis on shareholder return and distrib-
uted ownership across many shareholders, many firms use
stock options and performance-related compensation to
resolve the principal-agent problem. As a result, we have
seen extraordinary growth across industries in salaries
and bonuses for senior executives. This was once associ-
ated predominantly with executives in financial services,
but managers in other types of organizations are now being
compensated on a similar scale. UK house-builder Persim-
mon, for instance, paid its Chief Executive a £110 million
bonus in 2017.
I don’t believe that such extraordinary incentives make
any sense. After all, who would want to hire someone into a
CEO role if that person was motivated only by money to do
the job? I do think, though, that there is a market for CEOs,
and that companies must be competitive to attract talent in
some situations. Even if one believes these extraordinary
payments generate shareholder wealth by aligning incen-
tives, these practices still create dramatic inequality, with
CEOs being paid up to 300 times more than some of their
firms’ employees.You have found that these economic inequalities exacer-
bate social and occupational inequalities. How so?
Women and ethnic minorities, for instance, are less likely
to occupy lucrative positions; and investment bankers tendto earn many times what a nurse, teacher or retail associ-
ate makes. Recent trends in the private sector that reward
large cash holdings have also played a role in exacerbating
inequality, as they result in larger dividends to shareholders
at the expense of other claimants — especially employees.
Similarly, corporate tax-avoidance strategies lessen the re-
distribution of wealth in societies, effectively reducing fund-
ing to education, health and the social safety net.Describe how inequality has created ‘hourglass organi-
zations’.
Inequality has only been deepened by outsourcing and cost
reductions, as well as the broader transformation of many
Western economies from a basis in manufacturing to servic-
es. Cost reduction strategies worsen inequality because low-
er paid employees face stagnating wages and the prospect of
job loss. These disparities have been exacerbated by the shift
from manufacturing to services, resulting in ‘hourglass or-
ganizations’: Large numbers of high-status professional and
managerial jobs requiring formal credentials and qualifica-
tions occupy the top half of the structure and equally large
or larger numbers of uncredentialed, low-status occupations
inhabit the bottom half, with relatively small numbers of
technical jobs in between.
Put simply, contemporary organizations have become
bifurcated systems in which senior managers and some jobs
requiring professional expertise are well-rewarded while
those on the front lines, such as nurses, retail assistants and
call-centre operatives, are not.What are the implications for society?
When we treat people like robots and lose a sense of the
whole person — when there is no sense of humanity in our
interactions with each other and we just view each other in
analytical terms — the very legitimacy of the corporation in
society comes into question.
What was the original purpose of the corporation in
society? It was to allow people to come together to ac-
complish things that they couldn’t accomplish apart, and
to allow for risk sharing and coordination of activity thatOrganizations have started to treat people who are not
in the dominant power group as somehow not fully human.