I had the privilege of attending, for the second time, the Skoll World Forum on Social Entrepreneurship, in Oxford, from which I’ve just returned. The conference has emerged as the world”s pre-eminent gathering of social entrepreneurs.
A variety of interesting and thought-provoking issues emerged, each of which would justify its own posting. One of the most fascinating to me, and it came up at several sessions, was that of pay. In short, what social enterprise chief executives can or should pay themselves. Putting aside financial constraints, there appears to be a big question around the moral issues regarding the level of remuneration that can be justified for enterprises that claim to operate along social lines.
A CEO of one business asks how much is appropriate for her to be paid. Another social enterprise founder mentions the fact that a key staff member earns $100,000, prompting loud groans and rolling eyes of those in attendance. (It subsequently transpires that this employee subsequently leaves for twice the money to the private sector.)
I have seen this issue surface recently outside of Skoll as well. I know a firm, which has been started by two high paid (but not independently wealthy) media executives. In their case, they are vital to make the enterprise succeed, but feel queasy to pay themselves even one third of their private sector pay packets. The business will not succeed without the skills they “bring to the table”, but their families depend upon their earnings to bring sustenance to their family “table” as well. Another CEO pays himself a derisory salary as chief executive, even below charitable sector standards. Yet his competitors at other firms perform the same role on a voluntary basis. For this, the chief executive has come under criticism.
While I sympathize with those who feel private sector executive pay has gotten out of hand and concur with the view that social enterprise CEOs cannot be mercenary in their approach to their own compensation, I think this has gone too far. Furthermore, the unwillingness to pay close to competitive wages is puritanical and short-sighted. It will inevitably lead to slower growth for social enterprises and social businesses, and cause a long delay in bringing forth the substantial social returns they can generate. It is simply a fact of life in our system that certain skills are vital to the success of fast growing businesses, and in many cases these skills are high-priced. Moreover, not everybody in an organization has the dedication or the family circumstances to carry on in the social enterprise irrespective of financial reward. I think it’s vital that as the social sector matures it also “grows up” with respect to this issue of pay. Failure to do so will be like cutting off its nose to spite its face.