The 2014 Canadian Responsible Investment Conference is taking place in downtown Toronto this week at the Hyatt Regency at King and Peter. Considering the site backs on to the building housing the offices of Wealth Professional magazione there was no way we could not saunter over to report live from the floor.
Besides, who could resist the fascinating topics up for discussion?
The first plenary session of the day: “What Would Marx Think? Investors Respond to the Contradictions of Capitalism Income inequality” saw Bob Walker, a vice president of ESG Services and Ethical Funds, moderate a panel of experts discussing how investors are responding to the social challenges generating “critical systemic risks in today's economy.”
Sitting down after the session with panel member Michelle de Cordova, director of corporate engagement and public policy with NEI, she explained how a healthy, stable system is key to the functioning of modern economy. As de Cordova explains the extreme contradictions of capitalism are dangerous to the long-term interests of shareholders. “Return is not enough if the underlying social fabric is giving way. Companies can only do well if the system is healthy and stable,” she says.
The comments tap into the current cultural mood. Over the past year service industry workers, barely able to afford to feed themselves, have begun to agitate for a higher minimum wage. The growing disparity between the poorest and the wealthiest was one of the issues covered. So too was overly aggressive tax avoidance schemes and lack of access to good nutrition. These are all issues that would creat the kind of vibrant consumer economy in which companies can prosper.
De Corva notes one incremental success this year around the issue of executive compensation. Executive comp levels have risen dramatically over the last few decades, much higher and faster than pay elsewhere in the economy. But how far can the divide stretch?
Progressive capitalists like de Cordova talk about the importance not just of executives comparing themselves “horizontally” to other executives, but “vertically” to lower-ranked employees. What about raising pay in the lower ranks, or reigning in the gaps between top and bottom? Might such a focus lead to better performance? What are the risks of looking only at horizontal pay?
De Cordova notes a tiny first step on this front from Scotia and RBC this year, which provided metrics on "vertical" pay ratios to their compensation boards to consider this year. According to de Cordova: “I think we might be seeing a slight levelling off” when it comes to the rising gap between CEO and employee pay after decades of increasing inequality. “Interesting to see that be a trend,” she says.