Salary and social enterprise: what should entrepreneurs get paid?

Salary and social enterprise: what should entrepreneurs get paid?

Claudia Cahalane, The Guardian


How much pay should you take out of your business? And what is the ideal salary for a social enterpreneur? Claudia Cahalane samples salaries in the sector


The Guardian’s ‘Because I’m worth it’ article published at the end of last year gave a snapshot of what people in various professions earn in Britain today, one of them being a social entrepreneur averaging a salary of just under £11,000.


The article opened a debate on social entrepreneurs’ salaries – what do business leaders in the sector earn, and what would they like to earn? Should wage packets match those of private sector CEOs?


Out of the 20 UK-based social entrepreneurs who filled in a survey I ran on the subject, five said they did not earn a wage at all, and this had been going on for three years in some cases. A further handful of respondents were managing to take home just a few thousand annually.


"I can only afford to do this for another six months or so," admitted Salvatore Pignataro, a co-founder of online ethical shop Fair Squared, who is currently taking no wage from the business. "We have just started to trade and so far, so good. I’d like to eventually be on £30,000 to £50,000," he said hopefully.


More positively, a couple of those surveyed were hovering around the £20,000 and four were getting £30,000 to £40,000 a year. The wealthiest had a pay packet of £56,000 for running an outfit which turns over several million a year.


Successful social entrepreneur Craig Dearden Phillips says low wages at first are normal, but that this situation shouldn’t go on for too long.


"I wasn’t paid for a year when I started out at Speaking Up, says Dearden Phillips. "That’s the deal around entrepreneurship. It’s jam tomorrow – if you get it right. However, it wouldn’t be very good if you were earning £11,000 much beyond year two. Social enterprise founders should get a nice salary once the business is producing money. I was earning £65,000 when I left the company. We were turning over £7m and my pay was decided by the board.


None of those interviewed who earned zero, or a little over that, expected to get to Dearden Phillips’ leaving salary, but they were ambitious about taking home a living wage. Most hoped for about £25,000 to £40,000 (one suggested a dividend on top of £25,000 if the company was successful), a couple aimed for £45,000, and the most aspirational was Birmingham-based Richard Leighton, who runs social enterprise We Create – supporting up and coming fashion designers. He eventually hopes to get up to £60,000 a year, plus a bonus.


Other respondents, currently on salaries of £20,000 plus, were keen to get about £30,000 to £50,000. One, Dave Dawes, founder of social enterprise Nursing Leadership, said he’d like to earn £75,000. Finally, one interviewee thought £150,000 shouldn’t be off limits for a successful social entrepreneur.


In fact, several surveyed believed there was no reason why their salaries shouldn’t match those of public, private and charity CEOs. "The sky should be the limit," said one person, boldly.


But Helen Kersley, head of the New Economics Foundation’s Valuing What Matters team, says trying to mimic the often inflated salaries of private company CEOs is not the right way to decide on pay if people want a more equal society.


"We look at what else is going on around us and say, ‘well I’m just as valuable as them’. But if the chief executive takes more, there is less available for everyone else," she says. "You can’t just benchmarch yourself against private company CEOs’ pay because that’s not sustainable, it’s not the right way of looking at it."


There is no formula for deciding a salary, she says, but NEF is eager to see more discussion on the pay differential between the lowest and highest paid at all workplaces.


"At some big businesses, CEOs are earning 128 times the lowest paid worker. But, when you look across the economy there are such costs of this inequality; as a society it’s not working to have such differentials," says Kersley.


Pay differentials are a hot topic at the moment, with Will Hutton recently suggesting in his Fair Pay Review that there should be a differential of no more than 20 for public sector workers.


Ethical thinkers have argued for much less, often between about four and seven. However, one of the country’s most famous social enterprises, the co-operative John Lewis, practices a differential of times 75. A number of those surveyed felt this was way too high, and said they preferred a differential of three to four.


Revered social enterprise Hill Holt Wood pays its chief executive no more than four times the lowest salary. "We stole the idea from Ben & Jerry’s," says chief executive and co-founder Karen Lowthrope.


But Allison Ogden-Newton, head of Social Enterprise London, wants social entrepreneurs to be more ambitious about their salaries; she is not especially keen on any kind of pay cap or pay differential.


"Social entrepreneurs are in a situation where they get very little financial support to set the business up and they’re leveraging personal and social equity to make things work. I think it’s difficult for someone in that situation to be told they should restrict their salary, especially when you’ve got head teachers on £200,000," she comments.


Ogden-Newton adds that the sector wants to attract ambitious people, and that includes those who want to climb the salary ladder.


Ceri Jones, head of policy at the Social Enterprise Coalition, understands that there can be "more of a tension" in social enterprises, between using money to create social value, and paying people, but she encourages social entrepreneurs not to "devalue" themselves.


"If they’re doing a good job, they should be rewarded for it, and the market rate should be taken into account," says Jones.


She, and several of the social entrepreneurs interviewed also pointed out that private business entrepreneurs often sell their successful businesses and pocket millions, which social entrepreneurs don’t do – even when they have invested heavily into the enterprise. Some might argue that this makes it all the more important that they pay themselves justly while they can.


If you want to fill in the survey, I’m keeping it live here and perhaps in a year’s time an even clearer picture will emerge of what some of the brightest leaders in a new business era are earning and what they think they’re worth.