Betting that Consumers Will Prefer Companies That Pay a Fair Wage

In his latest online column for Time magazine, Drucker Institute Executive Director Rick Wartzman writes about Wagemark, a new campaign designed “to spur companies to narrow the pay gap between their highest and lowest earners.”

Wartzman notes that Wagemark, which this month began certifying organizations whose compensation systems meet its guidelines, a la Fair Trade coffee or Energy Star light bulbs, has made Peter Drucker a “patron saint” of its efforts.

To carry the Wagemark symbol, a company must show that the compensation gap between its highest paid employee and lowest paid employees is no greater than 8 to 1; the campaign intends to extend that to 30 to 1 (“in the ballpark of what Drucker himself recommended,” Wartzman notes) for bigger corporations. That’s in sharp contrast to the current gulf between the CEOs of the largest U.S. companies and the average rank-and-file worker, which now stands at more than 350 to 1 (or $12.3 million compared with about $35,000).

Wagemark is giving especially prominent play to Drucker’s notion that if companies were to adopt a published policy “that fixes the maximum compensation of all corporate executives as a multiple of the lowest paid regular full-time employee,” it would stand as “the most radical but also the most necessary innovation” that could be realized in this area.

With this in mind, Wartzman writes, Wagemark seems to be “deftly seizing” on a source of “innovative opportunity” that Drucker identified: a change in perception.

“In this case,” Wartzman says, “Wagemark is banking that more and more people have come to view sky-high compensation not as a badge of success among celebrity CEOs, as they might have seen it in the 1980s and ’90s, or as a well-justified byproduct of ‘maximizing shareholder value.’ Instead, huge pay packages are increasingly being linked —especially in light of the long-stagnant incomes of most working folks—to mounting concerns about income inequality.”