The following article by Lucy Kellaway (2001) is light-hearted and witty, but it also raises several interesting questions about relative pay levels and how we should determine them.

Pandora’s pay packet 

Imagine if you got into work to find you had been sent an email listing the salaries and bonuses of everybody in your company.

You’d fall on it, read it greedily. And then read it again. You’d scan the list for all those paid more than you. All those paid less. You’d look up the salaries of your most comparable colleagues. You’d look for those of the cocky ones whom you’ve never rated.

Assuming that you had started the day feeling reasonably content with your salary, by the end it would be a different story. Either you’d be seething at the higher salaries paid to people you think less deserving than yourself, or you’d be feeling sheepish about those talented hardworking people earning considerably less than you.

This is what happens in a case study in the latest Harvard Business Review. A disaffected employee unearths a complete salary and bonus list and promptly emails it to the entire staff. Sure enough, all hell breaks loose.

The four labour market experts wheeled on by the magazine to discuss the case agree on one thing. The forced disclosure will do some good – it will bring about a more open culture and a fairer pay system.

I think this is optimistic. Openness is not a good thing per se. It is good only when the occasion calls for it. Pay is the last taboo. Pay is full of iniquities and will always be so. Better, therefore, not to draw attention to it.

If you meet someone at a dinner party, you can ask them about their religion. You can ask them which way they are going to vote. You can ask what they paid for their house. (In fact, I consider this to be the height of bad manners but people ask, nevertheless.)

You may even, if circumstances are right, be able to ask about their sex lives. What you cannot do, under any circumstances, is ask how much they are paid. You could say that this reticence is misplaced and that in time pay will go the way of all the other taboos.

The reason salaries are so sensitive is that they are the only ‘objective’ way we have of comparing your labour to mine. Your salary is a clear measure of what someone else is prepared to pay for you. This makes pay more revealing than other kinds of financial information.

If I know you paid a lot for your house I can conclude any number of things. That your salary is huge. Or that your wife’s is. That one or other of you inherited some money. Or that you made a couple of lucky property moves in the past. There are all kinds of possibilities. But your salary measures only one thing: it sums up your worth. Only as we all know, it does nothing of the kind.

While it may be dangerous to discuss salaries at a dinner party, where bankers may be cheek by jowl with teachers, to discuss them in the office canteen is dynamite. If salaries in your company were determined fairly, according to some commonly agreed principle, secrecy might not be necessary. But they aren’t determined like that, are they? In the real world, your salary reflects a thousand different things, your ‘worth’ being only one of them.

When did you join the company? Was the job market tight at the time? Which department are you in? How well does your boss like you? How good are you at complaining? All these things affect your pay.

In the public sector people traditionally knew what others were paid, because for each grade and each task there was a rate. But now, thanks to performance-related pay, salary discussion is becoming taboo there too.

Some trendy new companies have experimented with full salary disclosure. This tends to work when the company is very young but as it grows and the outside labour market bears down, transparency seems like less of a good thing.

It could be argued that by publishing all salaries in a company you shock the system into greater ‘fairness’. But even if this did happen, it is doubtful whether it would be desirable. Would you want to own shares in a company that could not hire good people from the outside at higher wages for fear of alienating existing employees?

We have, under our noses, a good example of what happens when individual salaries are forcibly outed. For the past few years, directors of public companies have had to disclose in full, gory detail how much they are paid. The aim of this was to rein in the worst of the fat cat pay increases.

Yet it is debatable whether it has in fact achieved that. Pay levels of top directors have continued to soar and the supposed performance criteria they have held up to justify their bonuses have proved to be laughably easy to meet. Maybe they would have risen still further if disclosure had not been required; maybe they would not.

What transparency at the top has certainly done is to make everyone else’s sense of outrage and envy all the greater. Now that the fat cat is out of the bag, we can all see how fat it really is – and the sight does us no good at all.

So I am not going to tell you what I earn, either. More than anything else, I do not want to share this information with my colleagues. Yet suppose when I get into work tomorrow I find that email waiting for me. Will I heed the above and simply press the ‘delete’ button? Like hell. I’ll fall on it, read it greedily, then read it again.

Questions

1. Is pay really ‘the last taboo’ as is argued in this article?
2. Why is it only ‘dangerous’ to discuss salaries at a dinner party, but ‘dynamite’ to discuss them in the office canteen?

3. Is the author right to argue that more openness in the area of pay is not something to be welcomed?