When I think of wage transparency and the number of social issues it will help improve, I wonder why wage transparency is not discussed in Democratic circles and more importantly, part of the party platform. From equal pay for women, narrowing the wealth gap, lifting minority wages, and even a healthier more productive work environment, wage transparency works. Sweden shows that wage transparency works. The salaries of all our elected officials are public as are the salaries negotiated by professional sports players and entertainers. I work for a company that employs about sixty thousand people and the wage scale for just about everyone is there for all to see. I know there is this taboo about such things, but I think it’s time to fight for wage transparency.
How to implement it is another issue, but we could start with a tax code that is favorable to companies that provide wage transparency.
SomervilleTom says
I founded and then ran a venture-funded startup between 1989 and 1992. We grew from three employees when we operated out of my home to about 30 when I left. That team was among the best I’ve ever worked with. I drove a policy of full compensation transparency. While my investors at least initially rolled their eyes, I think it was a key contributor to our success.
We had full compensation transparency from launch for as long as I was CEO. Each of those 27 offers was vetted, in all its details, by the entire team. We did annual increases each year, and each increase for each employee was similarly public (within the company). I drove a process to ensure that each employee was fully aware of all aspects of the compensation of each other employee, including the executive team (myself, my VP of Engineering, and our President).
Our experience was that full transparency made wage and compensation decisions easier, not harder. So far as I know we had absolutely none of the internal bickering and back-biting that so often happens at annual review time and when new hires are recruited.
The literature about building high-performance teams is virtually unanimous that two core attributes are shared by such teams:
1. Trust: The first element of building trust is an explicitly stated and commonly held vision (a statement of the world we exist to create) for the entity. Wage transparency is a hugely effective way to build mutual trust.
2. Diversity: A commonly shared celebration of diversity — diversity in thinking styles, working styles, and in personal matters.
I am strong believer in the premise that full wage transparency is a win for every stakeholder, including taxpayers.
tedf says
I do not think it is that persuasive to argue, as you do, that wage transparency is better for employers. You may be right about that, but if you are, then presumably companies will adopt wage transparency on their own. The fact that they don’t suggests, doesn’t it, that there are countervailing reasons.
That’s not to say that wage transparency legislation may not be justified. It’s just to say that I’m not persuaded that it is justified by the benefits it will bring to employers.
SomervilleTom says
I agree that my final sentence is over-broad. It depends very much on the culture of the employer.
Some employers value perceived short-term gains more than long-term gains. Some employers value profitability over virtually every other attribute.
The world certainly is full of companies where management keeps compensation data absolutely private. Some companies use that information to keep compensation plans as low as possible. Employees who are viewed as non-essential and/or easily replaceable are frequently severely underpaid.
If the goal of an investor is to make an investment, strip the company of its assets, and sell the remaining debris for as much as possible, then I agree that wage transparency is significant impediment and is likely to be rejected.
Companies that value the “triple bottom line” are likely to be more receptive to the benefits of wage transparency than those who do not.
johntmay says
I’m starting to warm up to you Tom. Thanks for a well written post and a convincing argument for a topic I find to be critical to many of the problems we face with our American modal of capitalism.
SomervilleTom says
I appreciate the kind words
hesterprynne says
I come with a bit of good news from Beacon Hill. On July 1, the Equal Pay Act, which was passed in 2016, takes effect The law (1) prohibits pay differentials based on gender, (2) provides that employers may not prohibit employees from disclosing or discussing their wages, and (3) provides that employers may not ask prospective employees for their salary history before making an offer of employment.
More here.
Yes, only a baby step. But it’s in the right direction.