Comments on: Two Opposing Views on Pay Transparency

By: Frank Roche

Frank Roche — Mon, 02 Mar 2009 18:56:00 +0000

Really great…I will use this as a story in its own right tomorrow…really well said..it’s going to be about performance management…so true.

By: PeachFlambe

PeachFlambe — Sun, 01 Mar 2009 17:23:33 +0000

Not to be overly nit-picky or technical, but the requirements for enhanced disclosure of executive pay were not a part of Sarbanes Oxley (other than the prohibition of loans to executives). The most recent revisions to the disclosure regulations covering executive comp were enacted by the SEC in 2006, four years after SOX (and 14 years after the last major rewrite). While the same forces certainly contributed to the desire for increased disclosure, the accounting and financial disclosure changes required by SOX preceeded the exec comp changes by a few years.

On the topic of transparency – I say be careful what you wish for. This really isn’t an issue about pay, it’s an issue about people’s perception of their self worth. In my 24 years in big corporations, I have found that most pay systems sit on top of completely inadequate performance management and career development processes that are run by managers who are not skilled in people management. It’s easier to let people believe they are better than they are, since to give them true, honest feedback would be disruptive to the business, make the manager’s job harder, etc. So performance issues don’t get addressed, people continue to get raises (because to deny them would be “demotivating”) and along we go until a major shock – a recession, say – means we have to deal with the years and years of poor management. And how do we do that? Layoffs.

Performance is in the eye of the beholder. There are very few jobs where there is an absolute standard. And people will always think they are better than their boss thinks they are. I don’t think anything we can say about pay is going to change that.

By: Frank Roche

Frank Roche — Thu, 26 Feb 2009 14:44:26 +0000

@Wile Hmmm…I have to think about that. My take is that opening up the books without a lot of preparation is going to release the floodgates, and no one will be prepared for that.

By: Frank Roche

Frank Roche — Thu, 26 Feb 2009 14:43:14 +0000

@Charlie The performance assessment is going to be the big thing. We’ll go from undiscussable to open discussion. I’m not sure how it would work out, but I’m intrigued.

By: Frank Roche

Frank Roche — Thu, 26 Feb 2009 14:41:47 +0000

@Darcy, wow, what a crazy stat, huh? Everyone thinks there’s a superstar. That is going to be the essence of what companies will have to do if pay transparency becomes the law of the land — then it’s going to require the tough discussions about performance — and many, many people are going to be astonished that they’re not at the head of the class.

By: Darcy

Darcy — Thu, 26 Feb 2009 14:29:46 +0000

Business Week published a study on August 20, 2007 asking people if they were in the top 10% of performers in their company. The overall average of people answering “yes” to that question was 90%.

I am not totally opposed to pay transperency, but I do think the organization would have to be prepared to address this issue. If 90% of people think they’re in the top 10%, that’s where they’re going to think their pay should be too.

Although your top 10% performers are the ones you absolutely cannot afford to lose, you also need the other huge percentage of people who are meeting your expectations for their particular position, your “valued contributors”. Pay transperency may cause conversations about how someone’s performance isn’t as stellar as they themselves believe it to be, which could then result in lowered morale, productivity, and even costly turnover.

By: Charlie

Charlie — Thu, 26 Feb 2009 13:54:19 +0000

“…The highest salary now becomes the minimum salary and I want more than the minimum.”

I imagine people may feel this way. But I don’t see it as a problem, but rather a good thing. Managers just need to respond “Prove that you are worth it.” Transparency then just becomes a motivational tool.

By: wile

wile — Wed, 25 Feb 2009 17:29:23 +0000

Not sure is an issue the fact that a CEO knows the pay of others_
a) ’cause they know anyhow – headhunters are more than willing to inform them;
b) ’cause a CEO should know his/her value

No positive effect in being not transparent – it’s just a way that we (HR) use to mask our lack of ability to hire and grow mature resources.