Bath Business and Society

Research, analysis and comment on the role of business in society from Bath's School of Management

Topic: Policy

How can NGOs become more credible watchdogs?

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📥  Charity, Giving, Policy

 

Non Governmental Organisations (NGOs) are indispensable watchdogs against corrupt practices and global challenges found in complex, modern societies. Yet sometimes, NGOs themselves can struggle to live up to the ambitious standards they demand of others, such as responsible advocacy, ethical fundraising, and meaningful participation of stakeholders. In this piece, Prize Fellow Stefan Hielscher and his co-authors Jan Winkin and Ingo Pies discuss their recently published research, which suggests that strengthening the rules of “fair competition” among NGOs is a promising avenue to increase their credibility.

 

Stereotyping by NGOs

With so many causes competing for attention from the public, it’s perhaps inevitable that NGOs may opt for shock tactics. Some controversial tactics can be very effective in raising public attention, gaining member support and securing funding, “Poverty pornography” provides a telling example. Critical observers invoke the term to describe the use of shocking but misleading imagery in NGOs’ fundraising campaigns, such as the notorious “potbellied child.” Critics claim such campaigns conceal the root causes of poverty, misdirect well-intentioned help, and violate the dignity of those in need. The website Rusty Radiator collects a variety of impressively frustrating examples, awarding the “fundraising video with the worst use of stereotypes” on an annual basis.

Granted, poverty porn is an extreme example. But it is the case that NGOs are sometimes tempted to simplify messages, thereby misrepresenting complex issues, and this may result in the root causes of the problem being misunderstood. For example, recent research reveals serious inconsistencies in advocacy positions related to the global food crisis in 2008. Before the food crisis, NGOs claimed that low food prices would promote poverty and hunger in rural areas in developing countries. After the food crisis, however, the very same NGOs claimed that high food prices cause hunger and poverty in urban areas in developing countries.

 

NGOs and responsible advocacy

To address challenges to their accountability and strengthen their credibility, in 2008 the international NGO elite founded “Accountable Now” (AN). Responsible advocacy is one of 12 agreed-upon accountability standards, and includes fact checks and clear procedures for advocacy positions. A complaints handling mechanism was designed to give stakeholders a voice to critique misrepresented interests or other questionable advocacy practices. A 2016 survey by AN of members and non-members however, revealed sobering results. NGOs seem to fare quite poorly in “stakeholder responsiveness” and “responsible advocacy.” Only about 10% of NGOs responded to complaints raised by AN’s evaluation team in a blind test, and many NGOs lacked robust fact checks and clear procedures to adopt or exit advocacy positions.

 

How competition affects NGO behaviour

Why is it that even member NGOs struggle to comply with AN’s standards? Our research suggests that NGOs operate in a highly competitive environment, all seeking funding, members and media attention. All these are necessary, but scare resources, and the competition for these can impede responsible advocacy.

NGOs are facing a “social dilemma” here. They can either choose the easy option and seek out attention without worrying too much about potential negative side-effects, or present a measured view which incorporates the best available knowledge on a controversial issue. The danger is that by taking the easy option, other NGOs will follow suit to secure their piece of the pie. As a result, the whole third sector’s reputation and credibility as a promotor of social change is put at risk.

 

Creating an enabling environment for responsible advocacy

Can we expect NGOs to refrain from this kind of race-to-the-bottom competition, and to engage in responsible advocacy on a voluntary basis? While some international “giant” NGOs may have the resources to take the moral high ground, some smaller NGOs are facing much stronger threats to their survival. For some of them, every successful fundraising campaign counts. Some NGOs will be able do the right thing only if the organisational benefits outweigh the associated costs. They will need to be sure that their competitors for public attention will follow suit in responsible advocacy.

This is why Accountable Now is such an important initiative. NGOs need to establish their own regulatory framework to raise standards for the whole sector. Within the AN’s NGO community, some voices are demanding stronger leadership to make this happen. Others are looking more towards external monitoring.

Our research has found that to be effective, both strategies need be designed so as to create a more enabling environment for NGOs and therefore to improve the cost-benefit balance. Effective monitoring of stereotyping campaigns requires graduated “reputational sanctions,” for example by raising public awareness of bad examples. Conversely, AN could reward best practice with public attention, by, for example, awarding prizes for responsible advocacy to leading NGOs.

There are no ready made solutions for these issues. It is important for NGOs, though, to acknowledge that they are not spared from the adverse impact of competition just because they are siding with the weak, the marginalized, the neglected and the poor. The insight of economics also applies here: good intentions need be supported by appropriate incentives, to do the right thing and to do things right.

 

Image by Howard Lake

Tackling child labour in the fashion industry - why the best firms have the most to lose

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📥  Business and society, Consumers, Human rights, Modern slavery, Policy, Supply chains

 

New research suggests that firms with a good reputation for ethical sourcing in the fashion industry are judged more harshly than their peers when child labour is discovered in their supply chainMeggan Caddey, a final year PhD student, and Johanne Grosvold and Stephen Pavelin, all from the Centre for Business, Organisations and Society at the University of Bath, explain their findings.

Child labour remains a major societal challenge. The International Labour Organization (ILO) estimates that 168 million children are involved in child labour today, which the United Nations (UN) defines as “work for which the child is either too young – work done below the required minimum age – or work which, because of its detrimental nature or conditions, is altogether considered unacceptable for children and is prohibited”. Many of these children work in the garment and fashion apparel industry.

The drive for child labour

According to the organisation Stop Child Labour, fast fashion has resulted in high demand for children who are willing to work for very low pay and in dangerous conditions. Some have suggested that their employment is tantamount to modern day slavery. Some of our best known high street brands including Adidas, H&M and Nike have relied on manufacturers who have subsequently been exposed as using children to work in unsafe conditions.

Increasingly, global firms are recognising that failure to address the challenge of child labour can seriously impact on their corporate reputation. However fashion supply chains are complex, relying on numerous suppliers, sub suppliers and manufacturers. According to H&M’s Head of Sustainability Helena Helmersson, these supply chain networks are so complex that “it is impossible to be in full control”.

Corporate responsibility and corporate reputation

Prior research indicates that, by going above and beyond the basic requirements for fulfilling their corporate social responsibilities, proactive firms can engender goodwill that acts as an insurance against potential damage to their reputation.  The theory goes that if news of wrongdoing emerges from the supply chain of such a proactive firm, its reputation will suffer less because people will give it the benefit of the doubt - 'surely, this good firm must not be to blame'. Other firms that have no such record of exemplary behaviour would be more readily blamed and, as a result, their reputations would suffer more. According to this theory, H&M would suffer less of a reputational impact if child labour was uncovered in its supply chain, as it is now working strategically to become the most ethical fashion chain on the high street. We set out to test this theory in relation to supply chains in the apparel industry.

Research findings

Our study used an experimental vignette method. This involved presenting study participants with carefully constructed, lifelike scenarios, to evaluate their attitudes, opinions and views of a firm’s actions regarding child labour in the fashion supply chain. Over 800 participants took part in our study, and our initial results are surprising. We found that a firm that had taken steps to address child labour and unsafe working conditions in its supply chain enjoyed a better reputation than a firm that had not. However, when something went wrong, people judged these firms more harshly than they did the firms that had previously behaved less responsibly. So, while firms that are more socially responsible tend to benefit from an improved reputation, such goodwill is accompanied by greater reputational risks - specifically, such a firm experiences greater harm to its reputation if unsafe labour practices are subsequently discovered in its supply chain.

Our findings imply that it is in firms’ interests to address unsafe practices in their supply chains, as doing so results in a better corporate reputation. However, our results also suggest that steps taken to stamp out child labour and poor working conditions tend to strengthen the imperative for a firm to maintain a consistent commitment to responsible sourcing. If they don’t, they risk particularly stringent reputational punishment. In effect, this can create something of a virtuous cycle, which gives momentum to firm's steps towards stamping out child labour and unsafe working conditions. Careful reputation management implies that firms setting high standards must continue to live up to them.

The business case for doing good

There is an increased policy emphasis from both governments and NGOs to reduce the use of child labour and unsafe working conditions in the supply chain. There is also evidence that firms are increasingly taking the problem of child labour seriously, with some estimates suggesting that reliance on child labour was reduced by 30% from 2002-2012. As our research shows, tackling this issue can bring benefits for both children and firms.

We provide distinctive new evidence that guides us towards a more detailed understanding of the business case for being good and doing good. By illustrating the reputational benefits of sustainable supply chain practices, our research findings can help motivate firms not already on board, and inspire those who have already taken action to sustain and expand their efforts. This may in turn encourage them to sign up to independent initiatives such as  GoodWeave, which awards companies the right to carry the GoodWeave label if they can show that no child labour or bonded labour was used in the production of their goods. With 11% of the world’s children still sacrificing school in order to work, this is no time for business to be complacent.

Image by Zoriah

 

 

Higher education as a global commodity

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📥  Education, Policy

 

Rajani Naidoo is Professor and Director of the University of Bath's International Centre for Higher Education Management, and recently organised a conference in South Africa to explore higher education's contribution to inclusive development. In this piece, she reflects on the commodification of higher education and the implications for the sector in emerging economies.

In the past, powerful organisations such as the World Bank promoted the view that investment in higher education in emerging economies offered low returns. There is now widespread agreement that quality higher education is essential for emerging economies to escape their peripheral status in the global economy. However, burgeoning demand, a lack of financial and academic resources and brain drain prevent poorer countries from developing strong higher education systems. In this context the provision of degrees by foreign universities could have much to offer. But what are the benefits and the pitfalls when universities from rich countries offer degrees in poorer countries?

Universities in high income countries have previously operated under a model that was distinct from business. However, this is changing. Government funding has been reduced and the belief that universities should be independent from corporate and political interests has been challenged. The social and cultural mission of higher education has been eclipsed by the demand for it to contribute in a more direct way to each country’s competitive edge in the global economy. Universities have thus become more like businesses, and they seek to increase revenue by transforming degrees into global commodities.

A growing number of public and private non-profit universities have joined for-profit conglomerates in exploiting new market opportunities in low income countries. At the same time, rapidly growing economies such as China have developed new higher education relationships with the developing world. There have been a number of benefits. Foreign universities have helped meet demand for higher education where there is little domestic capacity. They have opened up the possibility of degree level study to sectors of the population such as particular ethnic groups, or women, who might otherwise be excluded by their governments. They have also been more responsive in linking courses to changing labour market needs.

Numerous examples exist of reputable foreign institutions working in partnership with universities in emerging economies to meet national goals for transformation. An example of this is the University of Bath School of Management partnership with Nelson Mandela Metropolitan University in South Africa. Leaders from South Africa’s universities come together to study for a professional doctorate with the aim of contributing to the positive transformation of  the country’s higher education system.

But there are also dangers. Universities that are financially squeezed may protect provision in their home countries whilst viewing developing countries as mass markets for lower cost learning. The reduction of costs may be achieved by focusing on scale rather than quality. There may be a large reliance on learning resources which simply provide information in an attempt to ‘teacher proof’ delivery. This becomes important when less qualified, less experienced, and thus cheaper faculty are used. Rather than using a variety of feedback mechanisms to help students learn in a developmental way, there may be too much reliance on easy-to-assess computerised multiple choice tests. There is little investment in academic resources such as libraries.

When motivated by profit, foreign universities are more likely to offer programmes in disciplines which generate revenue at the expense of disciplines that are expensive or difficult to teach. This draws students away from studying these subjects at indigenous universities, who as a result lose the income from popular courses that they need to cross-subsidise expensive subjects such as Medicine and Engineering. This may in turn lead to a shortage of graduates in key strategic areas that are essential for a country’s economic and social development.

In a marketised higher education environment, there is little interest in research degrees. Masters and Diploma programmes based on coursework hold the promise of economies of scale. These courses are often similar to undergraduate courses and do not contribute to training new generations of indigenous researchers.

Such dangers impact on all countries but these are particularly risky in countries which have undergone social transformation and where democratic dispensations may be fragile. So how can developing countries capitalise on the benefits of foreign universities while protecting themselves from the most corrosive forms of commodification?

Robust regulation is required to protect students from unscrupulous providers and assure quality. It is ironic that developing countries are urged to create unregulated markets in higher education while rich countries maintain strong protectionist mechanisms in their own countries. At the same time, regulation should not stifle innovation but should be flexible and fleet of foot to assess different types of institutions. Foreign universities could be steered through incentives so that rather than merely competing on price and prestige, universities compete to meet developmental goals. In addition, decisions can be made regarding which aspects of higher education should be publicly funded and protected and which can be opened to the market.

Above all, policy makers should desist from implementing competition as a solution to all the problems facing higher education. We need joined-up policy to foster a combination of collaboration, competition and differentiation between domestic, foreign and private providers in order to create a system from which everyone benefits.

 

Image by Aaron Hawkins

 

Changing our diet to save the planet - the role of social marketing

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📥  Consumers, Environment, Policy

 

CBOS PhD student Thomas Mansell discusses the role of social marketing in helping people shift towards more sustainable consumer eating habits through four distinct stages of change. 

Global food consumption and production is seriously unbalanced. In the UK alone we threw away 4.4 million tonnes of “avoidable” food waste in 2015 – that is food that was edible before it was discarded – which equates to £13 billion worth of food wasted, or £470 per household. Meanwhile, nearly 800 million people globally are chronically undernourished.

The world population is projected to grow to 9 billion people by the middle of this century. We face a huge challenge in finding ways to adequately feed this rapidly growing population whilst also protecting the natural environment.

However it is not just the amount of food production and the balance of its distribution that are key concerns for sustainably feeding the planet. We also need to think about what we are eating.

Presently western diets are characterised by a high proportion of animal foodstuffs, and this is a problem not just for our health, but for the environment.  The Hunger Project has cited climate change as one of the hidden sources of hunger. In doing so it highlights how food production and the environment are inextricably linked.

Meat and dairy production requires more land, more water and has higher greenhouse gas emissions than plant based alternatives. As the global population continues to grow, we will need to be ever more prudent with the resources that are required for food production. We must consider whether the proportion of resources currently devoted to meat and dairy production is optimal given the numbers needing to be fed and the environmental impacts such diets can cause.

Already China has pledged to reduce its meat consumption by 50% by 2050 through changing its government-issued dietary regulations. In many European countries, however, there is more resistance to regulation. The German Environment Ministry’s plan to no longer serve meat at official functions was met with criticism earlier this year. In the UK, the government has a clear preference for encouraging individuals to make the right choices as opposed to regulating them.

So how can people be encouraged to switch to a more planet friendly diet? And how can social marketers and policy makers encourage a dietary transformation of the population when it seems so many people struggle with, or are resistant to change? Research in the field of environmental psychology suggests that individuals will switch to a meat-reduced diet, but this change needs to be self-regulated and go through a process of several stages before it sticks. At each of these four stages of change an individual needs to overcome different barriers to progress to the next stage.

At the first stage, individuals have a stable but unsustainable behaviour pattern and do not see any need to change. For those in this stage, the initial barrier is to understand why their current behaviour is harmful and to recognise that by changing it they could ameliorate this harm.

At the second stage, individuals are contemplating changing their behaviour but haven’t yet changed what they are doing and may be unsure how to do so. They need to determine a specific course of action that facilitates their goals. In relation to meat reduction, this could involve reducing portion sizes, only eating meat at one meal or having meat free days.

At the third stage, individuals are trialling their new behaviour, but are still highly susceptible to relapses. To progress to the final stage, they must come up with effective implementation plans to ensure their new behaviours will be sustainable in different contexts.

Should individuals reach the fourth and final stage, their behaviour should have built up some resistance to relapses and is therefore more likely to have an impact.

The research tells us that targeted campaigns designed to reduce meat consumption which address the specific stage of change for an individual, are more effective than traditional informational campaigns. At the University of Bath, our research is looking at which social marketing techniques are most effective at each stage of change. In particular, we are looking at what social factors are significant in driving change through the different stages. This is particularly important given the social or collaborative aspects of dietary behaviours: we might eat breakfast with our family, lunch with our colleagues and have dinner at a restaurant with friends. Each of these situations brings different social rewards and pressures which are likely to impact on our choices.

Understanding these contexts is therefore of utmost importance when designing behaviour change campaigns. If we can better understand how individuals are likely to respond to different campaigns and policy measures to change their diets, then we can help social marketers and policymakers design measures that are least likely to encounter resistance and most likely to encourage the desired behaviour changes.

The food system is inherently complex and reducing meat consumption is just one example of how consumer habits will need to change if we are to alleviate world hunger and sustainably feed the planet. If we can arm policy makers and change agents with the right tools to encourage a shift to different behaviours, then hopefully we can enable a smoother transition to a sustainable food system.

Image by Albert Mock

 

Trump’s first 100 days have triggered political activism among corporate America

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📥  Business and society, Environment, Human rights, Policy

 

President Trump has introduced a flurry of legislation in his first 100 days. Companies and their CEOs are responding by taking stands on political issues in ways rarely seen before. Andrew Crane asks whether this could end up transforming the way we think about corporate responsibility.

President Trump’s first 100 days have not been good for the planet. While the question of whether he will fulfil his campaign promise of rolling back the US’s commitment on the Paris climate deal is still to be settled, he has stuffed his cabinet with climate change sceptics. Most notably, the appointment of Scott Pruitt to head up the US Environmental Protection Agency met with a storm of criticism. This was hardly surprising given his ties with the energy industry, his denial of man-made climate change, and a long history of fighting the very agency he has been appointed to lead.

Trump and his cabinet have not been slow in rolling back environmental regulation introduced during the Obama presidency. As part of an effort to revive the coal industry, an executive order last month started unravelling Obama’s clean power plan (CPP). As the New York Times reported, the order effectively ceded the US’s leadership in addressing climate change and turned “denials of climate change into national policy”.

While such developments were hardly unexpected, what has been interesting has been the corporate response. Last November, nearly 400 US companies including Nike, Levis Strauss and Starbucks demanded that he leave in place low-emissions policies. In the wake of the CPP announcements in March many companies again took a public stand against the policy reversal. For example, Mars Inc. expressed disappointment at the policy change while tech companies including Apple, Amazon and Microsoft signed a joint statement supporting the CPP.

It is rare to hear companies, and US companies in particular, arguing to keep regulation. They are also usually unwilling to take explicit political stands in the public eye, preferring to use lobbying and more covert forms of political influence to sway governments to act in their interests. But the corporate response to the climate rollback seems to be part of a broader change of heart among senior executives to take public positions against what they see as undesirable policy shifts.

This change was first noticeable following Trump’s immigration ban back in January that saw wholesale restrictions on refugees and others from predominantly Muslim countries from entering the US. As Business Insider reports, “Before the day was over, Facebook's CEO had published a post denouncing the order. By the end of the weekend, Starbucks' CEO had outlined plans to hire 10,000 refugees. And, within a week, Uber's CEO had quit Trump's economic team as thousands deleted their accounts with the ride-hailing app.”

The response by corporate America to the immigration ban was significant and widespread. Rather than the usual caution about taking a political stand on a hot button issue, companies as diverse as Coca Cola, Google, and Ford came out against the policy. The tech industry’s response gained a lot of attention, not only because high profile companies and their leaders such as Sergey Brin at Google actively spoke out against the executive order, but also because regular tech industry employees staged walkouts and protests rarely seen before in the industry. For many in tech, the Atlantic reported, this was the first time they had taken part in political activism in their lives.

 

company-reaction-immigration-ban

 

So what does all this mean? There are a number of ways of looking at this, but the big change for me is that US companies are starting to acknowledge a meaningful role for themselves as explicit political actors. In the past, few company executives would ever admit that their actions were in any way political. “We don’t do politics” was the mantra, despite the billions of dollars spent on lobbying and trying to buy influence in Washington. However, as companies have more openly started addressing issues traditionally thought of as government responsibilities – protecting human rights, providing public goods, enforcing social and environmental standards, and the like – the cloak has gradually slipped.

Scholars of corporate responsibility such as myself have been analysing these developments over the past couple of decades, labelling these new corporate behaviours variously as “corporate citizenship”, “political CSR”, or “private governance”. So the response by corporate America to Trump’s first 100 days is not so much a sudden change in their core corporate responsibility behaviours, more a new found willingness to start acknowledging what has been increasingly apparent all along: corporations do indeed play an explicitly political role.

Acknowledging something is the first step to dealing with it. And the role of business in politics is something that we certainly do need to address as a matter of urgency. Most business leaders may not be completely comfortable yet with admitting their political role, but many do want to start thinking more seriously about their impact on the world, as Mark Zuckerberg’s recent 6,000 word manifesto exemplifies. Further radical announcements from the Trump administration are likely to incite yet more corporate political activism. So while we may not be able to thank President Trump for his impact on the planet, he may yet be responsible for a breakthrough moment in companies’ understandings of their changing role in society.

Header image by Ted Eytan

 

Brexit likely to increase modern slavery in the UK

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📥  Brexit, Modern slavery, Policy, Supply chains

 

Theresa May’s historic signing of Article 50 looks set to be her lasting legacy as Prime Minister. Unfortunately, it is also likely to derail her other signature policy on modern slavery. Our research suggests Brexit could increase modern slavery in the UK.

The signing of Article 50 marks the point of no return for the UK’s exit from the European Union. Although she inherited the Brexit decision, Theresa May’s political legacy will stand and fall on how successfully she manages to steer the country through the turmoil.

Without a doubt, Article 50 will bring untold changes to the political, economic and cultural landscape of the country. One change that will certainly be high on May’s radar is its effect on modern slavery in the UK.

Modern slavery has been May’s signature policy since she was Home Secretary. She introduced the landmark Modern Slavery Act in 2015 prior to becoming PM, and has since continued to champion the cause. In announcing a ramping up of Government efforts to improve enforcement last year, she identified modern slavery as “the great human rights issue of our time” and heralded the UK as leading the way in defeating it.

While the Act is far from perfect, it has certainly focused increased attention and resources on modern slavery. Prosecution levels also appear to be improving. This was most recently illustrated by the sentencing of the Markowski brothers to six years in prison for trafficking and then exploiting 18 people from Poland, who they brought to the UK to work in a Sports Direct warehouse.

The problem is, despite the advances gradually being made in addressing modern slavery in the UK, the signing of Article 50 is likely to worsen the problem. As May is probably acutely aware (but is so far not saying), Brexit may well undermine the progress she has made to date. It is a case of two steps forward, one step back.

According to research I conducted with an international team of colleagues looking at forced labour in the UK (initially funded by the Joseph Rowntree Foundation), four main problems are evident.

1.      Brexit will increase the demand for modern slavery

The Brexit vote has already created uncertainty among the legions of poorly paid, but legal migrant workers from Eastern Europe that are employed in the UK’s low wage economy. Signing Article 50 may ultimately help stem the flow of workers into the country as intended. But who is going to replace them? Domestic workers will fill some of the gaps but companies are unlikely to be willing to improve wages and conditions to attract them in sufficient numbers. So there will be greater opportunities for unscrupulous middlemen to traffic in workers from overseas or prey on vulnerable UK citizens to force them into exploitative situations. Forced labour flourishes where local, low skilled labour is in short supply.

2.      Brexit will facilitate exploitation

Modern slavery often occurs when workers do not fully understand their legal rights and status. Our research uncovered various examples of migrant workers being exploited because those exploiting them misled them into the belief that they were working illegally. Perpetrators would also wait for or deliberately engineer changes in workers’ immigration status in order to exploit them. The point is that Brexit will create a period of increased uncertainty around legal status that will be a significant boon to exploiters.

3.      Brexit will increase the supply of modern slavery

Modern slavery occurs when people are vulnerable, either because of legal status, poverty, mental health, or drug and alcohol problems. In our research, the most common victims were those from countries such as Romania and Bulgaria who, at the time, were able to enter the country but were unable to work legally. This vulnerability was exploited by perpetrators who were able to coerce them into working in highly exploitative situations. The more the UK puts up barriers to people entering the country legally, the higher the risk of traffickers bringing them in illegally and pushing them into debt. Once workers are in debt, perpetrators are adept at escalating their indebtedness and creating situations of debt bondage.

4.      Brexit will turn victims into criminals

Our research found that many victims of forced labour in the UK were prosecuted under immigration offences rather than being identified as victims. The Modern Slavery Act has improved this situation but as the UK moves towards Brexit, the chances of this happening will increase because policing around immigration status is likely to intensify far more than around modern slavery.

May claims that under her leadership, “Britain will once again lead the way in defeating modern slavery”. But the bottom line is that by triggering Brexit, May will be left trying to solve a problem that she is helping create.

Image: Migrant Workers by Bread for the World

Why women and men too easily accept the gender pay gap

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📥  Gender equality, Policy

 

Writing for the Conversation, Dr Chris Dawson considers whether differences in psychology account for the gender pay gap.

 Large employers in the UK will have to publish from April annual data on their gender pay and bonuses gaps. While under the Equal Pay Act it is illegal to pay men and women differently for doing the same job, figures from the Office for National Statistics puts the gender pay gap for full-time employees in 2016 at 9.4% in the UK. The reasons for this substantial difference in earnings are often attributed to occupational segregation by gender, driven by differences in education, accumulated experience and discrimination. The Conversation

But recent research has instead focused on underlying gender differences in preferences and psychological attributes which may affect choice of work, and therefore help to explain the gender pay gap.

For instance, women may seek different career paths and value aspects of employment such as flexibility and a pleasant working environment instead of focusing directly on pay. On the whole, women tend also to be more risk averse than men and have lower preferences for competitive situations which can both lead to career choices with lower earnings than men.

So psychology seems to provide a fruitful area for explaining the gender pay gap. The focus of my own research into this subject is a particularly pertinent psychological trait, that of optimism. By optimism, I specifically mean systematically biased beliefs in the probability of doing well.

Psychologists have documented our tendency to view ourselves in implausibly positive ways and our absurd belief that our future will be better than the evidence of the present can possibly justify. However, when it comes to assessing our competence, our ability and our future prosperity, men really do overestimate themselves while women are typically more pessimistic. I found that this difference between men and women can really matter in matters of employment.

Optimism affects the satisfaction we get from our pay. While we know that women face a substantial wage penalty compared to men, they also tend to be more generally satisfied with their work and income. This is a counter-intuitive situation. We would expect those who get paid the most (men) to be the most satisfied. Here is where optimism, our biased perception of the future comes into play. The satisfaction we gain from our wages is to some extent based upon our expectations. Receiving £10 when you are expecting £5 feels pleasing. But receiving £10 when you are expecting £20 feels disappointing.

If women are predisposed to underestimating themselves and their labour market prospects, as my study finds, they will continue, on the whole, to be satisfied with such pay inequality. This is a worrying state of affairs. We tend to search for new jobs when we feel that some aspect of our current occupation, such as pay, can be improved upon. But if we are satisfied, we stay in that job, we don’t negotiate and we don’t ask for that promotion.

Battle of the sexes

For men it’s the opposite story. They constantly overestimate themselves, widening their vulnerability to inevitable disappointment. Disappointed workers negotiate, they always ask for promotions and are happy to switch employers to improve upon aspects of their jobs which they feel can be bettered.

So optimism pays off in the labour market – it drives the pursuit of employment with better wages. Optimism may also be beneficial in other ways. Psychologists have often linked optimism with motivation and our ability to cope with stress. Believing in ourselves and in our abilities may also help us to convince others, especially our boss, that we are brilliant.

After all, to convince others of your competence, you really need to believe it yourself. If psychology is the problem – even in labour markets with no discrimination – women will continue to earn less, simply because they are too easily satisfied with lower pay.

It is difficult to know how laws and policy makers can solve this pessimistic female outlook, since personality traits tend to be established and fixed early on in pre-adult life. But perhaps one step in the right direction would be for employers to adjust their recruitment and promotion policies, by pulling up women with potential instead of waiting for them to come knocking.

 

the-conversation

 

This article was originally published on The Conversation. Read the original article.

Getting women onto the board – why some countries fare better than others

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📥  Business and society, Gender equality, Policy

 

The world over, there are more men than women in corporate boardrooms. This means that business is missing out on the talent and skills of a hugely important group that could make business more competitive. Here, Dr Johanne Grosvold and Dr Bruce Rayton discuss research which shows how four key institutions - family, education, economy, and government - either facilitate or hinder women’s rise to the boardroom.

Following the collapse of Lehman Brothers in 2008, Christine Lagarde of the World Bank questioned whether the bank would have collapsed had it been the Lehman Sisters, rather than the Lehman Brothers. She suggested that insufficient gender diversity in the upper echelons of financial institutions was partly to blame for the financial crisis and corporate collapses.

The continued under-representation of women in corporate boardrooms across the world remains a thorn in the side of big business and politicians alike. Increasingly though, governments and businesses are beginning to consider what can be done to redress the balance. Some countries such as France and Sweden are leading the way with up to 41% of women on the board, while others such as Greece and Malta lag behind with rates of only around 5-10%.

Given such cross-national variation, we set out to understand why it persists and to identify what could be done better to make gender diversity in the boardroom a reality. Taking a sample of 23 countries, including most of Western Europe, the USA, Asia and Latin America, we analysed the role of education, family, religion, economy and the role of the government in influencing board diversity. Our results were both surprising and encouraging.

Out of the five institutions we analysed, four were statistically significant in helping to explain why women do or don’t make it to the boardroom. Family, education, economy and the government all played a role while religion was the only factor that had no apparent effect.

Education - in countries where women and men enjoy similar levels of enrolment in higher education, women are better represented in the boardroom.

Family - in countries where there are fewer incidents of divorce, there are fewer women on the board. In other words, we found that an unintended outcome of higher rates of the divorce over the last few years has been greater labour force engagement and executive ambitions amongst women.

Economy - where women make up a smaller proportion of the managerial labour force, there are fewer women on the board.

Government - in countries where governments back their welfare legislation and family friendly policies with money and, for example, subsidise childcare, women are better represented in the boardroom. Passing legislation and instigating initiatives designed to encourage women to balance family and working life only give the desired results if there is adequate funding to make these initiatives meaningful and effective.

We believe these results may be good news for business and women alike. Increasingly more women than men are pursuing higher education, which means they are giving themselves the best starting point for climbing the corporate ladder. It is important, though, that governments consider the potential effects of their broader policies on women and families, to ensure that these help rather than hinder women to capitalise on the benefits of higher education.

In many countries, women retain the role of primary carer. Governments are, however, increasingly attuned to the need for providing better funded welfare provisions such as subsidised childcare to ensure that women are able to contribute fully to society and economy. This suggests that going forward, business is likely to reap the rewards of even more and better talent. To maximise these benefits, business could play a more active role in complementing government action, for example by including subsidised childcare in remuneration packages in countries where such provisions are not routinely provided by the state.

Welfare provisions of this kind have typically been associated with liberal or social democracies. But the growing acknowledgement of the business case for supporting women's career progression means that governments and employers in all countries should do more to encourage gender balance in the boardroom.