Corporate Governance Ideology, Human Resource Practices and Senior Staff Salaries

*Nicholas Black and Peter Stokes*

### **Abstract**

This chapter examines the link between corporate governance ideology and HR (human resource) practices involved in the important and ongoing issue of senior staff salaries. In the spirit of financialization and hyper-individuals, the mainstream corporate governance ideology promotes beliefs about competitive pay and managerial power. These beliefs shape the design and implementation of HR practices by legitimizing the 'common-sense' assumption that senior staff members should, primarily, be rewarded for meeting corporate goals. However, our discussion critiques the use of this corporate governance ideology for encouraging myopia and silence amongst remuneration committee members in response to growing inequality. This is exemplified by an inductive analysis of remuneration committee minutes taken from British universities (n = 67). Interestingly, this example also highlighted a marginalized belief about sacrificial leadership that countered this growth under alternative ideology in the spirit of altruism. The chapter recommends the radical proposal that remuneration committees should expand their remit beyond only considering senior staff salaries and promote HR practices that will embed altruism and equality.

**Keywords:** HR practices, pay, universities, remuneration committees, corporate governance

### **1. Introduction**

Rising senior staff salaries is a contentious and ongoing human resources management (HRM) issue that received widespread prominence in the United Kingdom (UK) and United States of America (USA) after the 2008 financial crisis [1]. It is also likely to remerge in response to COVID-19 as many on the workforce may be prone to experiencing pay stagnation, zero-hour contracts, redundancies and work intensification in response to falling stock values and the economic recession. For organizations, being able to legitimize such inequality is particularly important as, according to the social contract tradition, socio-economic cooperation is dependent upon everyone believing they receive a fair stake of the economy [2]. However, legitimizing inequality is becoming increasingly harder as important institutions like the UNDP [3] and World Economic Forum [4] are campaigning against it.

Remuneration committees – also known as 'compensation committees' in the USA context – play a key function in determining senior staff salaries [5]. Past

studies focus on their important role in corporate governance, but the conventional understanding of how remuneration committees operate has historically focused primarily on agency theory and quantitative methods approaches [6]. In tandem, HR practices have typically embodied a shareholder-centric ideology rather than wider stewardship considerations [7, 8]. While these predilections may coincide with the spirit of financialization and hyper-individualism, there have recently been calls for HRM to return to its ethical roots – being born out of concern for human welfare – and promote more socially responsible and ethical HR practices [9]. This chapter aspires to respond to this need by exploring what HR practices remuneration committees are using to pay their senior staff and identifying the underpinning ideological norms. Equally, this chapter explores what alternative ideologies of corporate governance exist and theorizes how HR practices could be used to halt rises in senior salaries. Overall, this chapter seeks to answer the research question: How can HR practices be used within remuneration committees to promote equality?
