In its edition from 31st October 2009 The Economist magazine published an article with the title “A tough search for talent”. This article points out that the public sector across most rich countries struggles to find the right talent, an issue expected to get even worse when the labour market becomes more difficult for employers once the current economic crisis ends.

Two factors making it particularly difficult are:

• The public sector is increasingly looking for candidates with profiles closer to what the private sector is looking for.
• The culture within many public sector organisations can easily alienate the talent needed to face the challenges of the future.

These factors lead to the public sector losing many of the better candidates to the private or the charity sectors. You can read the full article via this link: www.economist.com/world/international/displaystory.cfm?story_id=14753826

A female employee of GEMA (The Society for Performance Rights) in Germany recently set a precedence in German labour law. Shortly after the new EEO (Equal Employment Opportunity) legislation was introduced in 2007, she took her employer to court: she felt she was discriminated against whilst pursuing a promotion for one of the organisation’s top 16 positions.

She argued that she was as well qualified as her male colleague who got the job. She convinced the judge that this was a case of discrimination using statistical evidence based on an expert’s report. The reasoning was straightforward: the report showed that with 85% of the organisation’s workforce being female the probability that all 16 top managers are male was far below 1%. The judge agreed that this was just too unlikely to happen without active discrimination against women. He therefore ruled that the woman should receive a payment to make up for the difference in salary plus 20,000 Euros in damages.

While executive pay has always been a controversial topic, the financial crisis brought it into the very centre of discussion.

How can CEO's justify salaries in the millions, if they don't seem to lead their companies the right way?
If the high salaries are justified by higher risk, why can they still get golden handshakes, when they have to leave due to disappointing performance?

These are questions the public is asking. Politicians found they can please voters by limiting salaries for board members of banks bailed out by governments.

But, what's actually fair?

Manfred Schmitt, Professor for Psychology at Landau University in Germany, talked about fair pay in a recent interview with "Sueddeutsche Zeitung". There is no objective measure, but most people feel very strongly about fairness. A CEO's salary is generally perceived as unfair, if it's more then 10 to 15 times the average salary. This is between 400,000 and 600,000 Euros meaning that many politicians demanding limits for executive pay got the sum about right - if we take perceived fairness as the right measure.

Schmitt says, fairness is not just an abstract concept nice to have, but can have tremendous effects on workforce performance. Experiments show that employees feeling treated extremely unfair on average have 20 absence days more than employees perceiving their employers and bosses to be fair.

So, keep in mind that it's not just about the number on someone's payslip. It's about the numbers on everybody else's payslips, too and it's about understanding where these numbers come from. The relevance of these insights in the current economic situation is obvious: if you have to cut down salaries, transparency, good communication and a larger cut in executive pay will make the change much easier to manage.