Tag: fairness

Environment in the balance

As I was researching for my (now very shortly) forthcoming book, I found less evidence for the benefits of fairness in relation to one of the traditional stakeholders of business than the others. This was the environment. In part, this was because of the strength of that evidence almost universally across the other key stakeholders. But perhaps more significant is the fact that the business relationship with the environment is not mediated by people. There is something built into how we interact with other humans, an ongoing push and pull of interests and mutual expectations, that leads to an arrival at a degree of fairness. Where humans are less immediately involved, there’s less of a gravitational pull to fairness, more scope for unfairness.

This left me focusing more in the environmental chapter on the need to strike a fair balance. Inevitably, I also discuss the challenge of externalities and the risks that businesses take when they depend on the persistence of those externalities – they can mask unprofitability when the ability to externalise costs is removed, as it usually is, sooner or later. I also discuss the so-called tragedy of the commons, whereby shared resources can be over-exploited and destroyed, and the remarkable work of Elinor Ostrom in identifying how readily communities can manage such common resources and preserve them into perpetuity. Ostrom’s work provides powerful insights helping support the delivery of intergenerational fairness.

It’s therefore been a pleasure for me to discover more recently that this idea of the need for environmental balance has support from a source I wasn’t aware of. That support comes from Islam. Indeed, for a number of Islamic scholars, the concept of balance is the religion’s key framing of the human interaction with the environment. Take the following, for example:

“Islam looks at the environment from the standpoint of balance. It envisions the environmental balance as a part of the universal ‘grand balance’. The Quran describes the notion of environmental balance in various terms like ‘adl’, ‘qadar’ and ‘mouzoon’. 
“The term ‘adl’ literally means acting justly, rightly, or equitably. While explaining the meaning of ‘adl’, one interpreter of the Quran has observed that the universe has been created in balanced form.” 

This scholar goes on to argue that this requirement for balance implies constraints on the demands humans can make in terms of both what they extract from the environment and what they discharge into it by way of pollution. 

Others have gone further in this analysis, and used the concept of balance to develop a wholesale approach to environmental matters. Al-Mizan apparently also means balance, and is the name for an approach developed alongside more than 300 Islamic institutions and international partners. Making clear that this concept of balance is intimately associated in Islam with equity, fairness and justice, the Al-Mizan Covenant for the Earth was finalised in 2024 and sets out a fair and just approach to environmental matters. 

Among other things, the Covenant asserts:

“The economic values of our faith are embodied in frugal moderation while taking joy in the sources of life for humankind and other living beings, respecting their inherent limits by forsaking wasteful excess for just, equitable sharing of their fruits, and forsaking exploitation of the Earth and its inhabitants for charity and cultivation.”

Given that the wealth of a number of Islamic nations arises from their role as fossil fuel producers, it is particularly notable that the Al-Mizan Covenant makes a call not just for a transition away from the burning of fossil fuels but for a wholesale phasing out of fossil fuel production. It does so while noting the need for a just transition for affected workers and communities. The Covenant also seeks sustainable and ethical farming practices, railing at the imbalances brought by monocultural industrial farming practices.

The Covenant’s commitment on the issue of indigenous people’s rights is particularly strong: “To remind leaders and decision makers that it is essential that people of all social and ethnic groups, traditional societies and indigenous people be consulted without discrimination, and that the weakest be held as strongest until their rights are fully secured, and the strongest held as weakest until they comply fully with the law.” The paper’s articulation of what is required by way of truly fair and empowered consultation of those who might otherwise be powerless is particularly striking.

The Covenant also argues strongly for enhanced education on environmental matters and for more community-led approaches to addressing environmental challenges. Again, this appears to be about empowering those whose power might otherwise be limited, and ensuring that there is a readier balance of power and influence in the preservation of biodiversity and natural resources.

While these ideas are clearly grounded in a specific religious perspective and culture, the lessons they teach are more general. Seeking to balance the interests of current generations with those to come, to balance the interests of the wealthy with the disempowered, seeking a balance in the level of exploitation of natural resources, are steps that are in our own interests as well as those less empowered or yet-to-be-born, they are fair. Ostrom, among others, shows clearly that we don’t need a faith-based approach to see that such a balance is fair to ourselves and others. However, we are sadly some distance from striking such a fair balance at present.

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour

Fairness in Business and Investment, Paul Lee. Routledge, 2026

Governing the Commons: The Evolution of Institutions for Collective Action, Elinor Ostrom. Cambridge University Press, 1990

Towards an Islamic Approach for Environmental Balance, Muhammed Ramzan Akhtar. Islamic Economic Studies, Vol 3 No 2, June 1996

Tafheem-ul-Quran [Towards Understanding the Quran], Syed Abu Al Ala Maududi

Al-Mizan: A Covenant for the Earth. 2024

Contractual crowding out

There is good evidence that the level of detail in legal contracts may crowd out moral intentions in relation to the agreements that the contracts represent. And despite the evidence seen in my prior blog on the importance of fairness to the law (see Fairness piercing the veil, and filling gaps in the law), it seems that there are increasing moves to squeeze fairness out from legal considerations, at least in the US legal system. Unsurprisingly perhaps, that is only to the law’s detriment, and to society’s.

Pennsylvania law professor Tess Wilkinson-Ryan found that, generally, people are averse to breaching contracts, and typically believe that those in breach should make higher pay-outs than efficiency might indicate was necessary. Typically, contract law expects the wronged party to mitigate their loss – for example seeking an alternative provider of a contracted-for widget rather than just ceasing all production and blaming the delinquent supplier. But Wilkinson-Ryan finds that most people think that the delinquent supplier should be held accountable for more than this mitigated loss.

She also finds, however, that if a contract includes a liquidated damages clause, most people’s response to any contractual failure is less morally activated, and tends to accept that the damages built into the contract are appropriate. This particular consequence of the sense of fairness means that breach of contract becomes more acceptable: “it seems reasonable to conclude that subjects’ moral qualms deter efficient breach, but that the presence of a liquidated-damages clause in a contract reduces those qualms and, in turn, encourages breach”. 

At its core, the finding is that: “it is not clear that breaching a contract with a liquidated-damages clause comes firmly within the category of breaking a promise”. Wilkinson-Ryan contrasts this attitude with that of a contractual breach that requires a lawsuit or the appointment of an authoritative body to assess what is the fair recompense for that breach. At such points, considerations of fairness and morality come into play; not so much if the contract has detailed an agreed level of damages.

A somewhat similar finding emerged from a sociological study considering trust in markets where contracts are complete or not complete. In this case, the quality of the relevant goods was variable. Where the contract enforced a level of quality, trust did not develop in supply relationships. However, in contrast, where the quality was not subject to contract, trust and fair treatment became vital parts of supply chain relations as the clear alternative provider of a degree of quality control. The development of such trusting and fair relationships had important and positive knock-on consequences: concern for one’s own reputation and considering others’ reputations, and a greater sense of commitment to trading partners. There are benefits from leaving space in contracts for fairness and trust to develop.

The long-term positives from such a commitment are shown in a second similar study, where again the quality of goods was either subject to contract or not capable of being contracted for. Where contracts were complete and included details on quality, trading relationships were less durable: 90% lasted less than 3 periods. In contrast, when trust and fair treatment were needed to fill the gaps in the contracts, trading relationships generally lasted much longer. 

This consistent finding that deploying fairness rather than detailed legal agreements brings clear benefits makes the recent tendency in the US legal system to squeeze out fairness altogether still more concerning. In my forthcoming book, I highlight the way in which the US law in the areas of antitrust (rules against monopolist behaviours and other abuses of competitive position) and bankruptcy has been interpreted such that fairness no longer plays a part. Formerly, fairness featured heavily in the legal approach to both issues. The consequences of this shift aren’t great.

A key study considers recent changes to the US antitrust regime that have essentially meant it abandons considerations of fairness to consumers and focuses solely on narrow interpretations of the concept of economic efficiency. It argues that these changes mean that the law has failed “to control the nefarious consequences of unrestrained market power”.

With regard to bankruptcy, the key legal precedent was a Delaware Supreme Court decision in 2007, North American Catholic Educational Programming v Gheewalla. This essentially removed the previous prioritisation given to equitable treatment of creditors – an expectation of fairness – and required instead a strict contractual approach to be applied. Since that abandonment of fair treatment of creditors by failing companies, battles have ensued between different finance houses over their carcases (part of so-called ‘bankruptcy hardball’). Though the US Chapter 11 bankruptcy process in theory gives heavy weight to the post-bankruptcy survival and prosperity of the stricken business, often this battling between finance houses leaves little value within the business to give it any chance of later prosperity. 

According to Harvard Law School professor Jared Ellias and Brown Rudnick lawyer Robert Stark, the consequences are profound:

“The slow moving trains of justice here have broader consequences than denying justice to one particular plaintiff or another. It emboldens the entire private equity industry to extract excessive dividends from portfolio firms, knowing that it might take more than a decade to litigate the fraudulent transfer action, by which time every employee currently at the private equity firm will be gone.”

Contracts are being written to crowd out fairness; the law (at least in the US) is often being understood to squeeze out fairness and lean instead on narrow contractual or economic readings. That isn’t good for the legal system, and it seems that it isn’t good for society either.

See also: Unfairness overwhelms bankruptcy
Fairness piercing the veil, and filling gaps in the law

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour

Do Liquidated Damages Encourage Breach? A Psychological Experiment, Tess Wilkinson-Ryan. Michigan Law Review 108, 2010

The Emergence of Exchange Structures: An Experimental Study of Uncertainty, Commitment, and Trust, Peter Kollock. American Journal of Sociology, 100, No 2, 1994

Relational Contracts and the Nature of Market Interactions, Martin Brown, Armin Falk, Ernst Fehr. Econometrica 72, No 3, 2004

The antitrust F word: Fairness considerations in competition law, Sandra Marco Colino. Journal of Business Law, 2019

North American Catholic Educational Programming Foundation, Inc v Gheewalla, Delaware Supreme Court 930 A.2d 92 (Del. 2007)

Bankruptcy Hardball, Jared Ellias, Robert Stark. 108 California Law Review 745, 2020

Fairness piercing the veil, and filling gaps in the law

An extraordinary legal case was decided in the UK in April, and it has recently been determined that there can be no appeal from it. The court decision has led directly to the insolvency of a major property development group, and it illustrates the way in which fairness fills gaps in the law – indeed how fairness is a core element of how the law works.

The case is extraordinary because it deploys fairness effectively to overthrow a fundamental element of corporate law. The decision in effect enables the piercing of the corporate veil – the legal barrier that means the liabilities of a company stop at its doors and cannot be claimed from a parent, other group company, or shareholder. Limited liability, through this mechanism of the corporate veil, is generally regarded as a core element of capitalism, a protection of the shareholder providing capital, freeing them from the risk that they might lose more than their contribution to the company through their buying of shares. Because of this perceived centrality to the capitalist system, courts, and indeed legislators, are deeply wary of piercing the veil in the way this decision does.

However, there are certain policy aims that are so substantial that such effective veil piercing is seen as necessary. That is true of the policy underlying the law in the case in question, Crest Nicholson Regeneration v Ardmore Construction. It concerns Building Liability Orders, established under the Building Safety Act to ensure that appropriate contributions are made by those responsible for the remediation of buildings which since the terrible Grenfell Tower fire (see Power leads us astray: fairness lessons from Grenfell) are recognised as representing significant risks. Building Liability Orders (BLOs) allow the courts to extend the liability for remediation costs from the immediate company involved to associated companies where it is ‘just and equitable’ (what this blog would call fair) to do so.

Image from KCTMO – Feeling the Heat!, sadly prescient blog from Grenfell Action Group, March 14 2017

I deliberately say that this ‘in effect’ pierces the corporate veil, because it’s worth noting that there is some debate as to whether this is a full piercing, though to a non-specialist this may seem a debate on the head of a pin. As Christopher Veal of leading barristers’ chambers Pump Court explains: 

“Whether this constitutes “piercing the corporate veil” in the traditional sense is contested: some courts and commentators treat BLOs as a distinct statutory remedy rather than classic veil-piercing, on the basis that the court is not disregarding the corporate structure but rather applying a legislative override. Others characterise the practical effect as functionally equivalent to piercing the veil. The distinction matters less in practice than the statutory test itself, which turns on whether it is just and equitable to extend liability.”

Even though there is this debate, the case makes clear that sometimes statute and policy considerations will take decisions to extend liability notwithstanding the perceived strong constraint of the corporate veil. This step was seen as particularly needed in the development sector, where there is a history of each individual development being built by a thinly capitalised subsidiary so as to protect the parent, and wider group, from exposures to any potential liability. The immediate subsidiary involved in the development, Ardmore Construction Ltd, had been put into administration on the day before the initial adjudication against it (the judge decided to accept the suggestion that this was coincidence), and the court also found that there had been a corporate restructuring with some intent to limit broader liability. The ruling means that this restructuring has failed: following the court’s decision to pierce the veil, the whole Ardmore Construction Group entered administration in mid-June, and other related companies have sought protection from creditors.

This application of fairness to close gaps in the law isn’t as infrequent as people might imagine. In many ways, it is a core element of the functioning of the common law, under which judges reach decisions that are not explicitly covered by legislation, applying broader judgement and higher principles to do so. Fairness is often one of those higher principles. Think about the famous 1930s case of the snail in the bottle of ginger beer, Donoghue v Stevenson. There would have been no need for the case to reach the House of Lords (then the UK’s highest court) if the drinker of the ginger beer in question had been its purchaser rather than her friend for whom she bought it. If the buyer had drunk it and suffered the consequences, contract law protections would have applied. In the absence of some form of contractual protection for the drinker, the House of Lords applied a more general duty of care to manufacturers and found that the Stevenson business could be seen to have negligently breached that duty of care. From this finding based in fairness has arisen the whole modern concept of the law of tort, whereby in certain constrained circumstances duties of care arise outside of contractual relationships.

In other situations, courts will imply fairness into contracts that on the face of it do not expect it. In her interesting book Fool Proof, law professor Tess Wilkinson-Ryan discusses the Massachusetts Supreme Court case Fortune v National Cash Register. Orville Fortune was employed at will and at a low salary, with his main pay opportunity through commission on sales – a portion paid at the point of sale and the rest on delivery and installation of the equipment. Fortune was sacked between landing a big sale and the point at which he would have received the second part of his commission from that sale. While on the face of the contract his employer could indeed do this, the courts implied a duty of good faith such that National Cash Regiester was not in fact permitted to exploit its worker in this way. Instead, it needed to treat Fortune fairly and allow him to take the fair benefit of the commission he had earned through his sale. The court stated bluntly: 

“we are merely recognizing the general requirement in this Commonwealth that parties to contracts and commercial transactions must act in good faith toward one another. Good faith and fair dealing between parties are pervasive requirements in our law; it can be said fairly, that parties to contracts or commercial transactions are bound by this standard.”

Further, there is a whole section of the English legal system fully animated by fairness. It is not by chance that this is called ‘equity’, now formally combined with the rest of the legal system but with its origins in a mediaeval court system focused on delivering fairness. As Alastair Hudson states in the opening words of the seventh edition of his Understanding Equity & Trusts: “Equity is a means by which English law ensures fair outcomes in individual cases where the strict application of the common law or statute would otherwise generate injustice.” In practice, the concept of equity applies somewhat more narrowly than this assertion implies, but the intent is to identify the fair outcome when there is a lack of clarity in the common law or in statute. Equity lies at the heart of trust law, and so as I explore in my forthcoming book, the sense of fairness animates the fiduciary duties with which trustees are vested. 

Hudson develops the thought further in his Great Debates in Equity and Trusts, recognising the need for the equity approach to soften the edge cases of common law and statute, so as to ensure that the legal system overall is “rounded”. He argues: “Clearly, there need to be rules … However, there will also be situations in which the ‘letter of the law’ will not necessarily produce an ideal response, or worse, a positively unfair response. There will be situations in which people need some flexibility in which to create new models which will work better for them personally or better in unanticipated situations. One future for the UK economy is likely to be in the creative field and in the new frontiers of technology. By definition, an innovative economy may need innovative legal models … to maximise its success. Therefore, non-rigid ways of thinking will be important.”

He concludes: “a legal system needs a synthesis of strict rules (of the sort typified by statute and by common law) and mechanisms for achieving fair outcomes when the strict rules will not achieve that”.

The extent to which fairness will require further substantive upendings of traditional legal understandings such as the Crest Nicholson Regeneration v Ardmore Construction piercing of the corporate veil remains to be seen. But it seems clear that fairness will continue to be needed to fill gaps in, and round off the edges of, the common law and legislation.

See also: Power leads us astray: fairness lessons from Grenfell
The limited responsibility company, or the tale of the unnatural revolutionary

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour.

Crest Nicholson Regeneration v Ardmore Construction [2026] EWHC 789

Crest Nicholson v Ardmore [2026] EWHC 789 (TCC): A Landmark Decision on Building Liability Orders, Christopher Veal. Pump Court Chambers, 22 May 2026

Donoghue v Stevenson [1932] AC 562

Fool Proof: How Fear of Playing the Sucker Shapes our Selves and the Social Order – and what we can do about it, Tess Wilkinson-Ryan. Harper Collins, 2023

Fortune v National Cash Register Co, 373 Mass 96 (1977)

Understanding Equity & Trusts, Alastair Hudson. Routledge, Seventh Edition 2022

Great Debates in Equity and Trusts, Alastair Hudson. Macmillan, 2014

Squid Game ‘fairness’ II

This blogpost follows Squid Game series (season) 3 and while it doesn’t contain specific spoilers it does assume some knowledge of the programme [readers may gather that I’ve been slow to catch its denouement]

Fairness lies at the core of the concept of Squid Game, Netflix’s dark Korean drama. The players induced to enter the game feel they have no options in a highly unequal society, and have often been cheated out of what little money they did have, in legal or illegal ways, or been caught cheating others and now have debts to repay. They take every risk in order to gain the chance of walking away with enough money to change their lives. In contrast, the so-called ‘VIPs’ are bored by the extent of their wealth and need fresh expensive thrills to stay even partially engaged and interested. Both groups have been dehumanised by unfairness – it’s not by chance that the VIPs wear golden animal masks. The sole individual not dehumanised is the protagonist, Seong Gi-hun, who makes a particular point of insisting on his humanity as he departs from the scene.

However, as discussed in this blog’s original Squid Game ‘fairness’, the concept of fairness was considered only a little in the first series of Squid Game. Then, the organisers manipulated the idea of fairness as the basis to argue that it was right to punish those who had transgressed the rules of their own peculiar and dystopian world. 

In the third series, the concept is deployed a little more overtly, particularly as part of a moving speech from the old lady, Jang Geum-ja (number 149) in the third episode, It’s not your fault. Jang deploys a cynicism about fairness that seems wholly appropriate to the cynicism of the programme overall:

“No matter how you look at it, life just is unfair. Bad people do bad things, but they blame others and go on to live in peace. Good people, on the other hand, beat themselves up about the smallest things.”

The organisers also again deploy the sense of fairness as a tool to justify their actions. In this case, they use it in praise of their own – again, peculiar and dystopian – version of democracy. Early in the first episode, the announcer asserts while the players view the rebellious dead from the end of series 2: “You are witnessing the fate of those who refused the democratic process of voting and instead attempted to stop the game using violent means. We will not tolerate any irrational behaviour which attempts to destroy the fair rules of this game, and such actions will be punished in accordance with our strict standards. We thank you again for your cooperation.”

The irony of complaining about the use of violent means to subvert democracy shouldn’t be lost on viewers: after all, there is an openness to, even a welcoming of, bullying and violence as part of and following the regular public ballots that deliver that ‘democracy’ (there’s a key moment when the organisers surprise us all by barring further violence between the players, at least outside the arena itself). The labelling of individuals by how they have voted fosters this scope for bullying and violence further: the series as a whole reminds us of the importance of the secret ballot to the effectiveness of democracy, to each voter being free to express their own opinion without unfair interference. In the absence of secret ballots, Squid Game’s democracy is a sham. As highlighted in Democracy – playing fair, fairness, equality and freedom are all necessary elements for true democracy to work. It’s clear to the viewer that the ‘democracy’ in Squid Game isn’t truly fair, in spite of the announcer’s words.

Fairness matters, deeply, in Squid Game; just not in the ways that the organisers claim.

See also: Squid Game ‘fairness’
Democracy – playing fair

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour.

What’s fair pay for a bank?

It’s fair to say that generally banks aren’t well known for the fairness of their approach to pay. So it was interesting to note the emphasis that UBS, now by far Switzerland’s dominant bank following its 2023 rescue of the failing Credit Suisse, places on the issue of fair pay in its latest, recently issued annual report.

But the problem is that it seems to this reader at least that the bank may not necessarily be focusing on the right forms of fairness in pay.

For example, in the introductory section of the 43-page compensation report, the bank answers its own question, How does UBS support pay fairness?, as follows:

“We pay for performance, and we take pay equity seriously. Across all our locations, we apply the same fair pay standards, reinforced by annual reviews of our approach and policies in line with established equal pay methodologies. In 2025, our statistical pay gap analyses reaffirmed that pay differences between male and female employees in similar roles across our core financial hubs remained below 1%, a difference consistent with that for 2024. If we find any gaps not explained by business or by appropriate employee factors, such as role, responsibility, experience, performance or location, we look at the root causes and address them.”

UBS develops this analysis a little further in the Compensation philosophy and governance section, under the title Fair and equitable pay. Key elements of this discussion read:

“Pay equity and equal opportunity are fundamental to support our strategy. Being an employer of choice and inclusive of all experiences, perspectives and backgrounds is critical to our success. Factors such as gender, culture, race, ethnicity, sexual orientation and identity, disability, family, veteran status, generations and part-time status should not impact opportunities available to our employees.

“Fair and consistent pay practices are designed to ensure that employees are appropriately rewarded for their contribution.”

It again emphasises that gender pay gap analysis shows gaps below 1% in pay for male and female employees “in similar roles across our core financial hubs”, an interesting geographical narrowing and also clearly ignoring the general experience that the issues in gender pay arise most often because of differential opportunities for men and women, which tend to lead to a skewing of roles away from strict ‘similarity’. And note that it has a marked gender skew overall in staff, given that only 41% are female.

If we set aside these limitations, this discussion of fairness seems fine as far as it goes, but it barely begins to address the promise of the titles given to it. This is not UBS ‘supporting pay fairness’; this is simply the bank not overtly discriminating in its treatment of different staff – which in many countries and cases will in any case be illegal. An actual discussion of the challenge of supporting pay fairness might acknowledge realities outside the bank, rather than this internal focus. The financialisation of our economies has helped fuel the broad inequalities that our world faces, as financial institutions, competing with each other for ‘talent’, bid up the pay of individuals well beyond what is affordable or realistic (even imaginable) for most businesses. The closest UBS comes to a proper understanding of what a broader mindset about fair pay, looking beyond the financial sector, might actually imply is this comment, which at least acknowledges some external benchmark:

“We also aim to ensure that all employees are paid at least a living wage. We regularly assess employees’ salaries against local living wages, using benchmarks defined by the Fair Wage Network. Our analysis in 2025 showed that employees’ salaries were at or above the respective benchmarks.”

A bank that was genuinely seeking to ‘support pay fairness’ might apply similar pay expectations – of that minimum living wage level pay – at all clients and counterparties. A bank that worked with its corporate customers to understand what local living wages might be in their countries of operation and how they might be achieved across relevant workforces while still delivering profitability would be a bank genuinely supporting this ambition.

A bank that was genuinely seeking to ‘support pay fairness’ might consider whether financialisation is leading to pay distortions between the financial sector and almost every other part of the economy.

These UBS does not do. As ever, the finance industry has a tendency to look inwards at itself and not outward at its role and influence in the real world. An article I reference a couple of times in my forthcoming book invites the industry to think about fairness ‘outside its cocoon’. Only if financial services starts to do that will it genuinely be supporting fairness. 

Duncan Mavin, in his (highly recommended) book telling the sad history of UBS’s takeover target, Meltdown: Scandal, Sleaze and the Collapse of Credit Suisse, identifies an unfair approach to pay as being part of the drivers of that bank’s failure: “The behaviour of the bank’s leaders hardly inspired other staff to be the best versions of themselves … Credit Suisse bankers got paid well, whatever happened. When the bank was making a profit, staff made a bundle, regardless of whether the results were driven by strong markets or great management. When the bank made a loss – because of misconduct, fines, bad behaviour or poor strategic decisions – the bonuses were good then too.” 

Inward-looking financial institutions are more likely to fail than ones that look outward and measure fairness against external benchmarks. Instead, they need to look beyond their comfortable cocoon.

See also: Diversity and fairness
Fairness in the pay ratio
Resentment and rents: fairness in executive pay
The Gini in the executive pay bottle

Annual Report 2025, UBS

Fairness Outside the Cocoon, Meir Statman, Financial Analysts Journal, Vol 60, No 6

Meltdown: Scandal, Sleaze and the Collapse of Credit Suisse, Duncan Mavin, Pan Macmillan 2024

Playing fair in detective fiction

A new novel called Fair Play was of course irresistible for this blog – especially when it turned out that the author, debut novelist Louise Hegarty, was speaking at my local bookshop.

Fair Play is an intriguing, even odd, blend. It starts as a modern story of a group of friends at a New Year’s party in an Airbnb country house. When one of the party dies mysteriously, it fractures into two: a locked-room detective story of the traditional sort, aping Agatha Christie, Arthur Conan Doyle, Dorothy L Sayers and so on, and the story of the grief of the dead man’s sister, Abigail, as she tries to make sense of what makes no sense.

The title of the book comes from what Hegarty has gathered as the ‘Fair Play Rules’ of detective fiction, three sets of guidance from its heyday of the late 1920s. Essentially, these are about being fair to the reader, so that we feel we have a fair chance of finding the truth, just as much as the detective, and at least we are smarter than the detective’s foil, the person Father Knox in one of the three sets of guidance, his 1929 Introduction to The Best Detective Stories of 1928-29, cruelly calls “The stupid friend of the detective, the Watson”.

It’s not hard to think of especially famous examples that breach some of the ‘Twenty Rules for Writing Detective Stories’ by SS Van Dine in The American Magazine in September 1928, for example numbers 12 and 13:

  • “There must be but one culprit, no matter how many murders are committed”; and
  • “Secret societies, camorras, mafias et al have no place in a detective story”

But then, some of the best writers have always played with the genre, on occasions bending the rules, only to the greater pleasure of the reader. The sleights of hand to pass quickly over clues after having brought them to our notice is one of the joys of these books (even if we only spot them after the fact!).

It’s not just my admiration for him as a writer that means my favourite of the three sets of guidance is that from TS Eliot, in a 1927 New Criterion piece in ‘Homage to Wilkie Collins’, widely seen to have invented the detective novel. The fifth of these is that “The detective should be highly intelligent but not superhuman. We should be able to follow his inferences and almost, but not quite, make them with him.” While being superhuman is not allowed, odd habits are: Hercule Poirot’s fastidiousness was clearly invented to hide (in plain sight) a decisive clue from the reader. It’s likely that same fastidiousness is what eventually came to annoy Christie so much about her character.

The key point of each of the guides is that the reader of a detective novel must emerge from the story not feeling cheated but feeling we could have got the answer for ourselves if only we had paid more attention, thought a little harder or taken a little more time to mull the clues available to us. We wouldn’t recommend to others a detective novel that was unfair by failing to live up to these expectations, and we probably wouldn’t read more from that writer. In reading, as in other things, humans favour fairness.

It needed no confirmation that Hegarty is a fan of detective stories, and of Christie in particular. Her handling of various of the standards of the genre, and particularly the playful repeated versions of different revelations of alternative murderers, show that very clearly. But in many ways the half of the book that is the detective novel is slight. What elevates Fair Play, and makes it linger in my mind, is the half that is the story of the sister’s grief. This, sparsely told and without easy answers, carries heft without being heavy.

The thing that seemed off limits at the talk was Hegarty’s own experience of grief. But it appears clear from the way she writes of it that she knows whereof she writes. We all have our experiences of grief, and this writing rings true, if anything helped by its sparseness. There are different short vignettes giving a vivid expression. Some of these are jarringly within a workplace setting, memorably a dull business meeting that comes to echo only with the words ‘my brother’s dead’. This feels very real, as does Abigail’s search for the answer, the simple revelation that will give her resolution. But life rarely offers the simple resolutions of a brilliant detective’s summing up.

Though there are no easy answers, I never felt cheated by what is an admirable first novel.

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour. I am also happy to wish readers the compliments of the season.

Louise Hegarty, 2025. Fair Play, Picador

Father Knox, 1929. Introduction to The Best Detective Stories of 1928-29, Faber

SS Van Dine, 1928. Twenty Rules for Writing Detective Stories, The American Magazine

TS Eliot, 1927. Homage to Wilkie Collins: An omnibus review of nine mystery novels, New Criterion

Bubbles and economic fragilities

With all the talk about a bubble in investment in so-called ‘AI’*, I have taken a moment to reread the classic on the 1929 Wall Street bubble bursting, US economist John Kenneth Galbraith’s The Great Crash 1929, first published in the 1950s.

Speculative market bubbles do come and go. As Galbraith notes, the reason that 1929 is most remembered is not so much that the speculative bubble had grown so large before bursting (though it was unusually large) but that there were such broad real economy impacts from the bursting of the bubble – the lost years known as the Great Depression. A pair of Galbraith datapoints start to capture the scale of the Great Depression in the US and its searing impact on ordinary people: unemployment in 1933 was 13 million, one in four of the labour force; and even in 1938 still one in five were out of work.

So trying to understand why the Great Crash sparked the Great Depression is of real interest and seems like a timely thing to consider. Galbraith has no patience for the Wall Street apologists who argue there was no connection between Crash and Depression, but he does see that there were vulnerabilities in the economy that made it particularly susceptible to the crisis.

The first of these is of most interest to this blog, and Galbraith headlines it ‘The bad distribution of income’, noting that in 1929 the top 5% received around 35% of all personal income, and that interest, dividends and rental income (the almost exclusive preserve of the wealthy) represented fully 22% of total family income.

“This highly unequal income distribution meant that the economy was dependent on a high level of investment or a high level of luxury consumer spending or both. The rich cannot buy great quantities of bread. If they are to dispose of what they receive it must be on luxuries or by way of investment in new plants and new projects. Both investment and luxury spending are subject, inevitably, to more erratic influences and to wider fluctuations than the bread and rent outlays of the $25-week workman. This high-bracket spending and investment was especially susceptible, one may assume, to the crushing news from the stock market in October 1929.”

Readers will recognise some of our current distortions in these reports of the imbalances of pre-crash 1929 (also see Is enough enough? Addressing the problem of the super-rich, and The centre cannot hold). Significant inequalities – especially unfair ones – make economies less robust, more risky and more prone to crisis.

That is the first of Galbraith’s linkages between Great Crash and Great Depression. The others are as follows (deploying my brief characterisations of his comments):

  • Bad corporate structure. A business sector including many swindlers and fraudsters.
  • Bad lending. Profligate lending to unsound businesses and investments.
  • Imbalanced trade positions. Long-term trading imbalances, sometimes exacerbated through the application of tariffs, with the resulting deficits sometimes filled by corrupt, or at least grey, payments.
  • Poor economic insight. Shonky economic data riddled with holes.

So clearly, we’ve nothing to worry about now.

I will leave Galbraith with the last words of this blogpost, without comment from me. In the last pages of the book, he writes: “during the next boom some newly rediscovered virtuosity of the free enterprise system will be cited. It will be pointed out that people are justified in paying the present prices – indeed, almost any price – to have an equity position in the system. Among the first to accept these rationalizations will be some of those responsible for invoking the controls. The newspapers, some of them, will agree and speak harshly of those who think action might be in order. They will be called men of little faith.”

* Seasoned readers may remember that I am an ‘AI’ sceptic – see A just AI Transition, for example

See also: Is enough enough? Addressing the problem of the super-rich
The centre cannot hold

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour – and also that I do not give, and am not authorised to give, personal financial advice. This blogpost should not be construed as such advice.

John Kenneth Galbraith, The Great Crash 1929. Hamish Hamilton 1955

The power of powerlessness

From this week’s Economist: how our sense of fairness means that we favour the underdog, and so makes forms of protest that seem powerless, powerful.

[if anyone is missing my blog, don’t worry! My fairness writing energies are largely being taken up by a book commitment; I’ll return re-energised to the blog next year, and you’ll also be able to read a book version of some of my Sense of Fairness thoughts]

Workers value dignity

It shouldn’t really be a surprise, but dignity at work – a combination of things such as the sense of autonomy and relationships with colleagues and bosses, and being treated fairly – matters to people. It’s as true at the bottom of the income scale, where observers might assume concerns about pay outweigh all other considerations, as it is higher up. Dignity matters to people, as I’ve been exploring in recent blogs.

For the book I am writing (on fairness in business and investment) I am currently investigating the literature on monopsony and oligopsony in labour markets. Monopsony is the distorted market situation arising from there being a single buyer of a good or service (a monopoly is where there’s a single seller); oligopsony is where there is a narrow enough group of buyers that they distort the marketplace. Economists are increasingly observing evidence that the labour market suffers inefficiencies that are consistent with oligopsony – employers having excess power in setting pay. Most workers would probably agree that their experiences too are consistent with this.

One part of this literature particularly stood out because it made a link to the issue of dignity, which increasingly seems a key element of people’s innate sense of fairness, and of their inclusion in society and the economy. In particular, a 2022 paper from the US National Bureau of Economic Research, called Power and Dignity in the Low-Wage Labor Market: Theory and Evidence from Wal-Mart Workers, uses evidence from real interactions with US employees of the globe’s largest private sector employer to understand their views and test hypotheses against reality.

The results are striking.

The study included four sentences exploring the degree to which workers had a sense of dignity in their jobs (these sentences were developed based on prior interviews with Wal-Mart workers that sought to understand their experience in the workplace, as well as earlier academic work). The overarching question was Indicate to what extent the sentence describes the workplace of your job at Walmart, and each time respondents were offered four responses (Almost Always; Often; Sometimes; Never). The four sentences were:

  • You [have/had] the opportunity to express yourself while at work.
  • You [can/could] rely on your co-workers to help you with work.
  • Your supervisor [treats/treated] you with respect.
  • Your supervisor [treats/treated] everyone fairly.

And of these four measures of dignity, it appears to be fairness that matters most. Indeed, a lack of fair treatment by one’s boss is in essence the greatest determinant of likelihood of quitting a job in the study, with the obvious exception of pay (and of the availability of hours of work a week, which is a clear part of the pay equation for those paid on an hourly basis):

Consistently, the study confirms that fairness and dignity are powerful drivers of work satisfaction, and thus in willingness to stay with an employer.

As the study states:

“A natural question is whether firms can adjust the level of dignity at work. While immediate supervisors likely have the most discretion over workplace dignity, supervisors can be incentivized by higher-level managers to treat subordinates fairly and with respect, and workplace rules can be designed to allow opportunities for self-expression and co-worker support. While it may take time to alter workplace experiences, and agency costs might be considerable, the significant cross-store variation we document below suggests that managers have some control over the level of workplace dignity.”

Our bosses, and how they treat us, matter.

As well as enhancing people management, the authors raise the interesting challenge of whether improving the competitive context of the labour market is necessary to increase dignity in the workplace, the experience of fairness for workers:

“any effort to increase workplace amenities (including subjective experiences at low-wage jobs) may require policies that reduce monopsony power in the low-wage labor market. The high levels of labor market competition in the immediate post-COVID labor market may have given workers the opportunity to quit jobs that didn’t provide dignity. Whether this results in firms upgrading the subjective experience of work remains to be seen.”

I’m not sure that we’ve yet seen significant enhancements to workplace dignity and fairness, but perhaps we should continue to live in hope.

See also: An inequality in dignity, or the dignity deficit
Belonging, not belongings

I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour

Power and Dignity in the Low-Wage Labor Market: Theory and Evidence from Wal-Mart Workers, Arindrajit Dube, Suresh Naidu, Adam Reich, NBER Working Paper No. 30441, September 2022