Soldiers support the police during a search operation in Lavender Hill on the Cape Flats in this August 2011 file photo. Picture: THE TIMES/ESA ALEXANDER
Soldiers support the police during a search operation in Lavender Hill on the Cape Flats in this August 2011 file photo. Picture: THE TIMES/ESA ALEXANDER

High unemployment — 29% in the second quarter of 2019, according to Statistics SA — is a major reason SA is one of the most unequal countries in the world. Besides being a human tragedy in itself, inequality also has a strong correlation with violent crime. Studies show that about a third of any country’s homicide rate can be attributed to high economic inequality.

Arguably, the same trend is playing out in organisations in the public and private sectors: intra-organisational “inequality” (the difference in income, status and benefits between executives and general staff) is a likely contributing cause of intra-organisational “crime” (unethical conduct and counterproductive work behaviour).

Let’s first focus on the societal level. In 2018, just over 22-million crimes were reported in SA, according to Crime Stats Simplified. These included 20,306 murders and 49,991 sexual offences. In the same year, there were 323,369 drug crimes and 86,119 instances of individuals caught driving under the influence of drugs and/or alcohol.

Why so much crime? Answering that question properly would involve several dimensions, but one would undoubtedly be SA’s geographic inequality index (Gini) co-efficient, which evaluates the degree of economic inequality in a specified geographic location, based on how easy it is for different subgroups of a population to access financial resources. The closer the score is to one, the more economically unequal the society. SA scored 0.63 in 2015 — the highest in the world.

It is important to understand that inequality is a relative measure that involves comparing things, and it is the difference that matters. In other words, even if part of the population earns salaries well above the poverty line and are able to meet their basic needs, a high level of economic inequality (in comparison to higher earners) will likely still lead to crime. Again, it’s the difference that matters, even if it’s “just” the difference between the middle class and the super-rich. This difference is referred to as “relative” poverty and can be contrasted with “absolute” poverty (being destitute).

It is fairly well understood that inequality and crime are interwoven at a societal level. Yet the ways in which the same trend could play out in organisations still needs to be explored. The danger of “relative” economic inequality needs to be considered with respect to the size of pay gaps within organisations. If economic inequality has such a strong relationship with violent crime, how strong is the relationship between economic inequality and crime within organisations?

What if the Gini co-efficient were calculated for organisations, measuring the income of the poorest labourer and the highest-paid executive? It is highly likely that we would find the same trend: that organisations with the largest pay gaps succumb to the highest levels of corporate crime, misconduct and counterproductive work behaviour.

Some evidence to support this has already emerged. The best-known case is the Enron debacle in the US. Executives at Enron flaunted their income, which acted as a lure for entry-level employees to take big risks in the hope of securing big rewards. This resulted in one of the farthest-reaching cases of accounting fraud ever encountered. Indeed, Enron no longer exists. In SA, we only have to remember the Marikana tragedy, which would never have occurred were it not for the severe levels of economic and social inequality between miners and mine bosses.

Although employees are not always privy to the income of their colleagues, most employees have a pretty good idea what others earn. This is often due to lifestyle comparisons, or because some flaunt their income. On the other hand, disclosure of executive remuneration is required of public companies with a certain public interest score. In this case, employees can easily compare their income with their senior leadership.

Studies of human behaviour may explain why perceived inequality leads to antisocial behaviour, whether in communities or the workplace. In brief, people are generally driven by two forces: the need to get ahead (a desire for status in social groups) and the need to get along (a desire to be liked and fit in). In the modern world, status is often defined by what you earn in comparison to others. If high levels of economic inequality are thrown into the mix, people will try anything to address the perceived imbalance. To do so, employees will focus on “getting ahead” rather than “getting along”. This type of behaviour can have dire consequences.

Companies should be wary of the signals they send to employees when executives are paid exorbitant salaries and entry-level workers receive a pittance. Of course, people should be rewarded for their work and some imbalance is unavoidable, but there are limits to what constitutes a fair difference. Intra-organisational economic inequality may in fact be a driving force behind corporate crime and corruption in both the public and private sectors in SA. It may be time for us to properly evaluate this relationship.

• Dr Vorster is a senior research specialist at The Ethics Institute.