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Transparency: a business need or an obligation?
Spain has a transparency problem. A recent report on the Non-Financial Reporting Act 11/2018 (designed to identify gender pay gaps) in the newspaper Expansión, highlighted that only 14% of IBEX listed companies reported pay conditions, whereas 94% reported non-discrimination systems.
The act requires all companies with over 500 employees or €40 million in turnover to submit a report on, among other things, their personnel policies.
Pay transparency is important for companies in their talent attraction efforts and beyond that is useful as a tool in the fight to eliminate the gender pay gap. 92% of working women and 80% of Spanish society demand pay transparency in companies to highlight and then eliminate the gap, according to Anna Ginès, director of the ESADE Institute for Labour Studies.
Promoting transparency and building the future
The Global Gender Gap Index produced by the World Economic Forum notes that it will take over 200 years to close the global economic gender gap. And bear in mind that Spain is ranked 29th (out of 149 countries) on the index.
In recent years several initiatives have been launched in Spain to promote transparency and policies that help eliminate unfair or discriminatory practices.
It is eminently sensible for the government to create measures that encourage a reduction in the 20% pay gap the Institute for National Statistics says exists between the genders in Spain.
However, in Spain, transparency is not currently seen as a business issue, which is somewhat paradoxical as the data indicates otherwise. Transparency manifests itself positively by improving company’s ability to attract the right talent and investors.
In EY’s report Tomorrow's Investment Role, they explain that 96% of investors demand non-financial information from companies to inform their investment decisions. This represents a step change in terms of the information they request, which was predominantly reports on finances and tangible assets.
This new information, although intangible, has enormous shareholder value. Why? Because for investors, transparency helps to build employee trust and attract talent, reducing costs for the business.
Purpose equals profits – and problems?
BlackRock chief executive Larry Fink discussed the purpose of companies in his 2019 letter to CEOs. He explained that profits are not inconsistent with purpose – in fact, profits and purpose are inextricably linked.
If we analyse Gen Y's interest in the purpose of companies, 61% said improving society is more important to them than generating profit. Indeed, millennials are nearly twice as likely to share information about their pay transparently.
However, the issue is more complicated than might initially appear. According to Grant Thornton, some employers believe that making pay public “can increase costs and undermine the competitiveness of their businesses.”
Scandinavian countries Norway, Sweden and Finland have policies of absolute transparency in pay matters. They are also very-highly developed societies, with Sweden, for example, offering parents 480 days of leave (90 mandatory for the mother, 90 for the father and the rest to be distributed as needed between both parents).
The Swedish government is also gender-equal, with 44% of parliament made up of women. And all three Scandinavian countries top the World Economic Forum rankings, whereas Spain is 29th. In many ways it would be unfair to compare the realities of these disparate countries because Spain still has a long way to go.
What rewards will transparency bring?
As for corporate reputation, it appears as though transparent companies will be rewarded by investors. As Forbes, points out, offering transparency is a voluntary action and a statement of intent towards society and a visible effort in being honest about internal practices to some degree.
Opening up to the world of values is an integral part of any value promise and it truly does impact on a company and its reputation.
In short transparency is a vital part of a company’s external identity, and an element that is welcomed because it helps to close the gap between what society wants and what business can (and should) do.
This is by no means a quick journey, but the simple fact that the conversation is being had publicly is a step in the right direction. Now society and business need to take more action.
If you would like to talk to me about any of the issues raised in this article or about how Page Executive can help you better understand your talent market, do not hesitate to contact me. You can also see our original article on Transparency here.
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