Employees

Pensions? An issue of corporate social responsibility? Well, yes actually (and we don't mean Equitable Life, mis-selling or the finer points of pension fund accounting). Here's the story. The hard economics of CSR boil down to finding the right balance between different stakeholder groups in a given financial year. How much to pay in dividends to investors against spending on employees for wages, benefits and working conditions or on high levels of environmental protection or on generous community contributions or on supply contracts with decent labour standards.

Why do we employees work? Partly to meet our current living costs and those of our families, but also to save up for when sickness and old age mean we can no longer earn an income. In the post WW2 era of jobs for life and the state safety net, retirement was funded either by government benefits or through company pensions, in which the employer guaranteed a certain percentage of final salary. Today, with more flexible employment patterns, greater longevity and unwillingness to pay high taxes, the trend is away from so-called 'defined benefits' to 'defined contributions': increasingly both government and employers are saying to employees "we'll pay just X; for the rest, over to you".

Where does that leave the socially responsible company? Firstly, it means making sure employees actually know what is going on, with sufficient information and understanding to make the right personal decisions. Second, it means paying adequately for both current and future needs. Third, it means including pay and pensions in external reports to society, so customers, potential new employees and others considering doing business know what's going on.

This also has implications for socially responsible investment. With more individuals investing and monitoring their own retirement funds, will it mean greater demand for 'ethical' funds? At the margin, probably. But with such a personally vital issue as quality of life in old age at stake, more likely it will reinforce the demand for high absolute returns, whatever the social implications.