**2. Literature review**

#### **2.1 Ideology: the design and implementation of HR practices**

The concept of ideology is used to describe a system of beliefs that are widely taken-for-granted and are assumed to be common-sense, natural and non-ideological by most of society [10]. Particularly for this book chapter, understanding the role of ideology is important because it socially conditions semiosis and it has a dialectic relationship with social practice. Or in simpler words, ideology represents the shared values that shape people in society accept as legitimate, and in turn, shapes how people in society behave. Although, ideologies can have different degrees of naturalization and some members of society could subscribe to alternative ideologies or draw upon multiple ideologies. Only mainstream ideologies, in that everyone shares them, become naturalized as background knowledge.

Ideology plays a central role in ordering all social interactions, including creating, reproducing and changing relations of power, hierarchy and exploitation [11]. HR practices that promote rises in senior staff salaries and inequality, like all social practices, have traces of ideology implicitly embedded within them. The values of the academic designing and producing the HR practice embeds their own ideological assumptions. Equally, the values of practitioners implementing and interpreting the HR practice also embed their own ideological assumptions.

While it might appear normal to most of society, the field of HRM itself has even been proposed as promoting a managerialist ideology and has been used criticized for facilitating the intensification of work and the commodification of labour [12]. The fundamental assumption underpinning most of HRM is unitarist, which is the belief that employee benefit from advancing their employers goals and their interests are intertwined [13]. The difference between reality and rhetoric has been subject to significant debate [14], nevertheless, within the context of contemporary capitalism, HRM is considered background knowledge and a core component of any organization.

#### **2.2 Context: financialization and hyper-individualism**

The features of contemporary capitalism have been described using multiple terms, but two of the most popular are financialization (i.e. translating all societal and organizational aspects into monetary terms) and hyper-individualism

*Corporate Governance Ideology, Human Resource Practices and Senior Staff Salaries DOI: http://dx.doi.org/10.5772/intechopen.96741*

(i.e. a reification of single person interests over the collective), which is the context within which many organizations, including British universities, are said to operate in. Financialization has numerous definitions but the one particularly pertinent to this present chapter is the ascendency of the shareholder value orientation representing the ideological driver behind organizational behavior [15]. While obviously, not every organization maximizes shareholder value, these are believed to be exceptions rather than the rule due to market competition. Essentially, organizations that invest their resources in social or environmental activities are said to be jeopardizing their market position and risk being takeover by financially stronger competitors that only maximize economic returns [16]. The role of HR within this context is limited and has been summarized as focusing on cost control, talent management and identifying value-adding employees as opposed to influencing corporate governance decisions [17].

Financialization shares many similarities with hyper-individual within contemporary capitalism, but the former focuses on organizational behavior, whereas the latter focuses on individual behavior. Hyper-individualism believes that everyone will maximize their economic self-interest, even at the expense of others, and this is the ideological driver behind individual behavior [18]. Within a meritocratic organization, competition and markets are believed to be the primary mechanisms for deciding recruitment, reward and promotion. Essentially, staff who are more capable will receive more of these opportunities, which will eventually allow them to become senior and receive higher salaries [19]. The role of HR within this context is limited to the alignment of individual economic interests with their employer and has been summarized as focusing on reward strategies, talent management and high-performance work systems [7] rather than collectivist alternatives [20]. While both sets of HR practices have different ideological underpinnings, the former HR practices associated with the context of hyper-individualism and financialization are more common and also coincide with the mainstream corporate governance ideology.

#### **2.3 Mainstream corporate governance ideology**

Corporate governance is broadly defined as the system of rules, laws and factors that control the operations of a company [21], and as part of this, decisions over senior staff salaries are seen to be very important [22]. However, it is rarely framed as an HR issue [17] but instead understood through two opposing beliefs about competitive pay and managerial power [6]. The former believes that markets and optimal pricing contracts are responsible for rises in senior staff pay [23], whereas the latter believes that senior staff use their influence to increase their pay by extracting rent from their organization [24]. While these beliefs reflect opposite propositions, they share the same ideological assumptions. Both are underpinned by agency theory, which is the assumption that the separation between ownership and management leads to problems such as moral hazard and adverse selection [25]. Thereby, the ideological purpose behind corporate governance is to align the interests of managers with their shareholders [15] and the legitimacy of rising senior staff salaries is dependent on whether it benefits shareholders.

Within modern capitalism, it is often assumed that senior staff may not always act in the best interests of shareholders and at given opportunities will pursue their self-interest by, for example: shirking their responsibility; 'empire building'; engaging in suboptimal risk-taking; seeking excessive compensation; and supporting nepotism. Accordingly, the normative solution is using the board of directors and HR-coordinated remuneration committee to monitor and control the level of pay for senior staff by aligning the interests of senior staff members with shareholders [5].

Supporters of competitive pay seek to prove that there a relationship between pay and performance which negates the principal-agent dilemma by illustrating that rises in senior staff salaries coincide with higher returns for shareholders. Supporters of managerial power aim to establish that there is a relationship between pay and power which the principal-agent dilemma causes by illustrating that rises in senior staff salaries do not coincide with higher returns for shareholders. In terms of empirical evidence, there is a vast number of studies validating both beliefs however neither approach is deemed to provide a complete explanation [6].

Implicitly within agency theory, corporate governance is about aligning the interests of those who manage the organization with those who own the organization [26]. Although, the dominance of this shareholder perspective is being somewhat eroded by the stakeholder perspective [27]. The latter approach suggests that corporate governance is about aligning the interests of those who manage the corporation with all stakeholders. While this provides an alternative measure of performance, ultimately it does not matter whether senior staff are being paid for creating shareholder value or stakeholder value, the consequences for pay are the same and it is merely a set of different performance metrics. The ideological purpose of the HR-coordinated remuneration committee thus continues to align rises in senior staff salaries with rises in performance, regardless of whether the corporate goal is to create value for only shareholders or all stakeholders. Worryingly for HRM at the senior level, remuneration committees do not need to concern themselves with rising senior staff salaries or workforce concerns about growing inequality as long as there is increasing performance to legitimize them both.

#### **2.4 HRM at the senior level**

Concerns about rising senior salaries and growing inequality are often believed to be important because of social responsibility and ethics [28], but mainstream corporate governance ideology is not necessarily equipped to encompass morality. Equally, the dominant approach to HRM could be criticized for not being equipped to understand these same concerns as HR practices often embody the same shareholder-centric ideology [29]. While HRM is not usually represented with staff membership to senior level committees and board, when it is, the HR director tends to act as a strategic business partner [30, 31]. HR within the business partnership role limits itself to promoting organizational goals, which has arguably been causing the profession to lose touch with employees and wider stewardship concerns [32]. HRM pursuing organizational goals may lead to a strategic mindset where HR practices are only a tool to create shareholder value [33] instead of advocating more employee-focused HR practices and improving the welfare of all staff [34].

HRM often accepts, implicitly or explicitly, the mainstream ideology of corporate governance by focusing on aligning the interests of employees with employers as per the unitary perspective [13]. For example, the HR practices of performancerelated pay, talent management and marketization have been uncritically used within HRM to legitimize increasing senior staff pay as they correspond with increasing levels of performance [7, 8]. These HR practices assume that employees are motivated by pay and will maximize their self-interest. These HR practices also assume that organizations can use pay as a mechanism to align both of their interests and ensure employees maximize their performance. However, none of these HR practices are born out of concern for human welfare or seek to promote more socially responsible and ethical HR practices that are increasingly demanded [9]. Rising senior staff pay and pay inequality will continue under these ideological assumptions, which is problematic as, according to the social contract tradition, socio-economic cooperation is dependent upon everyone believing they receive a

fair stake of the economy [2]. Therefore, this chapter seeks to explore what alternatives ideologies and HR practices exist that could promote equality.
