How to solve a problem like capitalism

Published by rudy Date posted on June 27, 2015

Capitalism needs to be saved…according to a doyenne of the investment industry.

Lynn Forester de Rothschild, chief executive of family-owned investment holding company E.L. Rothschild, told CNBC that she was on a mission to tackle inequality.

“Too much of the capital is going to the people who own capital, but how can we rebalance that so we can keep capitalism, rather than destroy it? I say let’s invest in companies that pay their workers well, that take care of their supply chain and those that create more balance,” she told CNBC Europe’s “Squawk Box” Friday.

She note that if capitalism was working properly, talk of the “One Percent” – the so-called wealthiest 1 percent of people in the world – would become a rarity.

“Nothing is wrong with capitalism (but) it is meant to be a process that creates broadly-shared prosperity. So if capitalism was really working, then the term, the ‘One Percent,’ would not have gained the traction that it has, so how do we make it work for more people?”

Rothschild’s own company, which she owns with husband Evelyn Robert de Rothschild of the well-known banking dynasty, has various business interests in media (including The Economist magazine), wealth management, real estate, agriculture and consumer goods.

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The company’s website says that, aside from those interests, it is “dedicated to the effort to make capitalism an engine for broad-based prosperity through its founding and ongoing work with the Coalition for Inclusive Capitalism.”

The coalition, a U.K.-based non-profit organization, has a 10-point plan that it says are ways to make capitalism better for all. These include valuing people as well as profit, consuming consciously, reforming tax, cleaning up crony capitalism and diversifying workforces. It also states that greed “is bad” and that capitalism must be a “force for good.”

The Coalition is holding a conference in London on Friday focused on how to achieve global economic systems that create long-term and broadly shared prosperity.

Rothschild told CNBC that one of the matters in focus at the conference was another point on the ten-point plan, on how to make people “bank better.”

“We’re going to have leaders of institutions representing $25 trillion of assets under management to talk about how to make banking better, how to make corporations better – again, to make sure the system works better for more people.”

Rothschild’s remarks come as the income gap between chief executive and worker is wider than ever. According to the latest research from the Economic Policy Institute released this week, tops CEOs make 300 times more than typical workers.

“The CEO-to-worker compensation ratio, 20-to-1 in 1965, peaked at 376-to-1 in 2000 and was 303-to-1 in 2014, far higher than in the 1960s, 1970s, 1980s, or 1990s,” the EPI said on its website. Their data also showed that average CEO compensation for the largest firms was $16.3 million in 2014, up 54.3 percent since the economic recovery began in 2009, it said.

While companies defend the large pay-packets of their executives, saying that better remuneration packages attracts better leaders — and hence profits – Rothschild insisted that profit-making could go hand-in-hand with a reform of the capitalist system.

“Nobody is against profitability…but the bonus pool in Wall Street last year was twice as large as all the income that went to all the hourly wages in America, something is just wrong with that.”

– By CNBC’s Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld

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