“The rich man in his castle, the poor man at his gate,
God made them high and lowly, and ordered their estate.”
Cecil Francis Alexander, 1848
Do super humans walk among us?
You’d have to conclude that they do, given the awe given and fealty paid to the dynamic wealth creators that our society simply cannot do without and who we cannot afford to upset. These business leaders inhabit a very different world from most of the rest of us; different places to sit at the football, opera and on planes, collegiate arrangements for taxation and different ways to make their voices heard with politicians and policy makers. They often get paid quite well too – in the UK they are, on average, paid twice their weight in gold every year.
You get what you pay for, don’t you?
Hang on though; some of us are undoubtedly worth more than others aren’t we? We must be, otherwise it wouldn’t be possible for salaries to vary as much as they do (in the US last year, average CEO income was 142 times that of employees). This difference in worth must be related to some definable, testable differences in abilities, otherwise why do it?
Luck, ability, or some of each?
When viewed with any objectivity, it is difficult to justify in any other way than by luck: the luck of birth, the luck of geography and the luck of time – when in history our lives take place. Significant evidence shows that social background and education plays a massive role in subsequent career success. In their 2009 submission to the Milburn Commission on Social Mobility in the UK, the Sutton Trust noted that: “…the link between parental background and a child’s future life chances is particularly strong; if you are born poor, you are more likely to stay poor in this country than in many other advanced nations.” Whilst, to be fair, the Sutton Trust found higher evidence of social mobility amongst FTSE 100 CEOs than in other areas, they noted that in 2009 54% of FTSE 100 CEOs were from private schools, which make up only 7% of the UK school population.
The resources that we have at our disposal have huge implications for the longevity, life chances and life choices not only of the individual but also of their descendents. Take the example of natural disasters in the developing world; there are two classes of victim in these situations – one whose access to insurance means they can escape and stand a chance of recovery, one who has no choice but to suffer the consequences for the foreseeable future.
Of course, it is obvious that the better resourced you are the more choices you have. But it does raise the question as to what a human being is really worth. I, for example, am pretty poor compared with many of the people I work with, due perhaps to the amount of time I spend writing blog posts and dreaming of how to change the world. However, when compared to humanity as a whole I am fantastically wealthy, amongst the richest 4% of the global population (test yourself at Global Rich List).
There are people however; whose income puts them in a far more exclusive club, the top 0.001% of our species’ top earners…
Chief Executives of big companies for example, really are worth a lot of money, the question is whether they are worth a lot because we pay them a lot or because this pay is a just reward for exceptional, unique and remarkable talents.
Worth (twice) their weight in gold
CEOs are worth twice their weight in gold: the average weight of male homo sapiens sapiens (and most of these super-human dynamic wealth creators are men) is around 80kg. The price of a kilo of gold today (April 24, 2012) is about £32,555. Multiply one by the other and you get a price of £2,604,000. Unfortunately however, this will only buy you about half a CEO (the average annual pay for a FTSE 100 CEO is £5.1 million) and it could be argued that if you cut a CEO in half just to save yourself a few quid then you would also catastrophically compromise their ability to dynamically create wealth.
Yes, but they are dynamic wealth creators after all…
Well, if they are it is sometimes difficult to tell. Certainly wealth is being created, but for whom, and is it extrovert wealth (the sort that goes out and meets lots of people) or introverted (the sort that sits all day in its overseas account hiding from the tax man and counting itself obsessively)?
It really depends, from a societal perspective, where you want wealth created, and for whom. Beyond the rhetoric of industry representatives there is actually quite compelling evidence that the traditional heroes of wealth creation (bankers and investors) struggle to compete on societal wealth creation with the perennially unsexy professions of childcare and hospital cleaning. NEF’s 2009 publication “A Bit Rich” analysed the social value created or destroyed by a variety of professions. Investment bankers were found to destroy £7 of social value for every £1 they create while hospital cleaners create £10 in social value for every £1 they are paid. Save your pity for the poor accountants though, who were found to destroy £47 for every £1 they generate.
Strong and perhaps powerful stuff, however it is worth remembering that for every study such as NEF’s there will be many telling different stories, highlighting the charitable works and tax paid by financial services (though of course the key question is not the total volume of tax but the proportion of tax paid vs. tax due).
But are they really different to the rest of us?
This is really the key thing to consider, are the people in our society who are paid hundreds of times the average wage really different, more capable or somehow possessed of greater insight, intelligence and ability than those of us with less flamboyant incomes?
This question has resonances with the age old nature versus nurture debate, and perhaps it is doomed to be discussed just as eternally. We don’t know how a hospital cleaner would perform had they found a career in investment banking any more than we know how a star investor would do if they had been handed a mop and bucket and directed towards the floor of Ward 3.
In my opinion, as noted above, luck is perhaps the most convincing reason why some of us are worth more (and less) than others. Of course, this doesn’t mean that we don’t have the ability to make the best and worst of whatever hand we are dealt, but it also doesn’t mean that we get what we deserve or are capable of. Many people in many jobs work long, hard hours, it’s just that not all such hours are equal – some are more equal than others.
May 2012 – “Shareholder Spring” Update!!
November 2012 – The Gift that Keeps on Giving! New figures show that that, during one of the UK’s deepest recessions for decades, executive pay increased by an average of more than 25%.
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