What's still missing from the idea of "radical fairness" is a response to the structural inequity of what is called "unearned income" accumulating at exponential rates, as a rule, and "earned incomes" accumulating at only linear rates, as a rule. Back when (before 1970) all sectors of the economy grew together there was a way to excuse the ever growing separation between the earnings from money that grow disproportionate to the effort invested, relative to the earnings of human services. The graph is a rather stark evidence that "something changed".

http://www.synapse9.com/issues/GDP-WageHistSM.jpg
discussed at: http://www.synapse9.com/signals/2012/09/07/computers-taking-over-our-jobs/

It seems it is many things changing at once, but whatever changed the problem is the same. The wages of the people being employed to operate the economy seem clearly not growing fast enough to be able to purchase the products of the economy. The earnings of investors evidently accumulating ever faster, also don't get used to purchase proportionate quantities of the economy's products. So that becomes the backstop problem, that the economy is going broke because capital accumulation is the investor’s normal practice.

So it would appear we are at a "Scrooge moment" when investors hording the earnings of the whole economy need to find some reason to spend it, or it may well go bankrupt for lack of customers, while losing its workforce at the same time for being unable to buy their own products.

Recent PhD work has shown the cause and effect contributions to why medium to large organisations in general find it hard to innovate and even harder for middle and senior managers to work together. These factors are born from the way such organisations recruit, promote and reward their management as well as the charater types and inherent traits of these people. One of the major groups of traits leads to systems and processes which are unfair and create sub-optimal performance from all over the organisations.

In most of these organisations, the oft quoted reason is usually something about the staff needing training, or the performance and development process is not working, or the silos are getting in the way etc. The reality lies more around the senior managers who create and sustain cultures which have winners at the expense of losers, encourages competition to protect their territories, rewards control and risk averstion, and strongly discourages collaborative behaviour to achieve outcomes.

So this challenge is the most critical by far as all the others depend on this challenge being met. Nothing else will happen unless the organisations which want leadership, innovation and 21st Century excellence tackle and succeed with creating an environment of excellence, achievement, accountibility and outcome.

The question of fairness is fundamentally a question of policy-making and ruling. Policies define what is a fair behavior in situations of conflicting interests and ruling is a matter of applying it to bring about fairness/justice. To be percived as fair, the policy should allocate the same rights to all individuals regardless of their gender, ethnicity or status.

For the purpose of simplification, let's eliminate the complexity of scale from the challenge question and reduce it to the following: what if we were able to formulate a single policy addressing a single aspect of the business (say pay per hour; sales incentives; decision making; which innovation to embrace... etc.) such that it creates maximum economic value for all stakeholders and is perceived as fair by all of them.

This leads me to suggesting the following quest for the R&D project: what if we were able to invent a "policies management model" that is capable of promoting the equitable socioeconomic wellfare of the employees, management and shareholders. We need a business model that is capable of regulating, directing/controlling and overseeing the behavior of individuals. A model that makes eveyrone accountable and equal in the eyes of the "law" or the system.

I've spent a lot of time thinking about what is fair. I think I agree with philosopher Alain de Botton's take. We can never have a completely fair system, but we should never stop trying.
See: http://blog.kahatika.com/?s=Fair

I also watched watched all Michael Sandels lectures on how we have attempted to adjust rule sets to achieve a fair justice system.
http://www.justiceharvard.org/watch/

The project I am working on called Kahatika attempts to build in fairness as part of the way it operates whilst throwing out traditional rulesets normally used to create a fair framework. Most would see it as radical.

I think I'm in love with this challenge! We tend to pay more attention to the most innovative companies of the world, or the best places to work, but what about the worst places to work? And more important, what about the future of the millions of souls who are trapped in those corrupted factories of disempowerment? If reinventing management is our goal, then we have a moral commitment in helping them unleash their creativity and passions. Let's ignite a revolution! It doesn't matter if you have a dream job in an awesome company (Amazon?) or co-founded a superb startup, you surely suffer the effects of this unfair system every time you receive poor customer service at a restaurant, or at a public office, or when you buy groceries at the supermarket. So, wouldn't be spectacular if the experience of Whole Foods Markets, for instance, would be the rule rather than the exception?

This gets my vote for the top Challenge!
Kouses and Posner in their book, "The Truth About Leadership" site a 2009 international study, where the majority of people surveyed said they trust a stranger more than they trust their boss!1 - Michael Segella, "How Europeans Do Layoff." Posted on the Harvard Business Review website June 9, 2009.
To quote a statement from the above, "Individuals will give best of themselves only if they feel the "system" is inherently fair."
I would include...not only "inherently fair" but in addition, individuals must believe that their leaders are "credible." Leadership is essentially a relationship between managers and direct reports or as Peter Block would say...between "watchers" and "doers." This means that if the direct reports don't trust the managers, the direct reports won't be intrinsically motivated to give it their best. A PricewaterhouseCoopers study of corporate innovation showed amoung the "Financial Times 100" showed that the number one differentiating factor between the top innovators and the bottom innovators was "trust." This means that if direct reports don't trust the managers, an organization is likely to under-perform and be slow to innovate.
I submit for your consideration that the world is in a alarming "credibility crisis" attributed to upper level managers in almost every institution in the U.S. One does not have to look far to be aware of this credibility/leadership crisis, for example, in higher education (Penn State - 14 years, 45 counts), in religion (Catholic Church priests 7 bishops), in the financial arena (Goldman Sachs, etc., etc.). I, for one, am outraged!
In addition, people are demanding "justice" as evidenced by the Occupy Wall Street and the Tea Party movements.
Organizational pay scales should be overhauled and structured based on contribution, character (demonstrated ethical behavior that benefits all employees) and responsibility rather than position, credentials and rank. I like a system of self-managed teams...work is driven by people of passion who have potential to make more money than a Vice-president or CEO.
So, I strongly agree with the above statement..."Radical fairness just might be the ultimate incentive system." - Paul Cesare, Metropolitan State University of Denver, METROLEADS program facilitator

For this comment to make any sense I’d like just for the moment to assume that we all agree that humans are somewhat flawed. Clearly we wouldn’t have mountains of management and leadership books collecting dust in our book cases, new ones arriving at Amazon each day were managers and leaders not presumed to be in need of improvement. I would place this question ahead of all the rest simply because if we do not find a way to “excise partisanship, politicking and abuse of power from our organizations” then the hoped for success of the other themes offered here for review become diminished. The question I have is whether an altogether different approach might be worth trying. Instead of fixing the problem people in management or leadership, what if we simply end run the bad ones and treat “fairness” as a cultural mandate? In today’s global market, few companies have the luxury of changing how middle and upper management thinks, speed is everything. I’ve been doing this for 15 years and CEO’s are always amazed at the results. The culture and politics are still there, but employees have a way around them with a little outside help. When the CEO takes action emanating from employees, they simply become more motivated and more creative. That’s fairness personified.

Great challenge, and in pursuing such a level of fairness will certainly create a number of "managerial by-products" that can only enhance innovation, leadership and eventually the intangible brand / culture value.

This is an amazing challenge and clearly gets my top vote! If there were to be more transparency and radical fairness in the promotion and appraisal performance the work place would be so much more productive! Like you have mentioned in the brief... Radical fairness might be the ultimate incentive for millions of managers at the receiving end of partisanship, politicking and boss management!