Open The Books: Why Pay Secrecy Needs To End

I never asked my father how much money he made, mostly because I knew that his answer would be the same thing he’d tell anybody else who asked: “That’s none of your business!”

Talking about money is one of the last great taboos in our society. In today’s workplace, your co-worker is more likely to tell you whether they’re having an affair than to say what their salary is. As money is wrapped in our notions of work, value and self-worth, this is understandable. It is an issue rife for potential jealousy and resentment.

Many private sector companies guard their employee salaries more closely than the recipe for Coca-Cola. More than a third have rules in which you can be disciplined or fired for disclosing what you earn. Such policies are technically illegal, but the penalties to the companies violating them have proven miniscule.

In today’s workplace, your co-worker is more likely to tell you whether they’re having an affair than to say what their salary is.

The arguments for pay secrecy are that to divulge such information would harm competitiveness and employee morale. Another unspoken reason is that pay secrecy is a way to hide pay inequities.

A 2013 report by the Bureau of Labor Statistics showed that women working full-time in Massachusetts in 2013 earned 81.2 percent of what men earned. Nationally, the figure is 82.1 percent; in Wyoming just 68.6 percent. Granted, progress has been made over the last 50 years, according to a report issued by the Institute for Women’s Policy Research, but genuine parity isn’t projected to happen nationwide until 2059. This is ridiculous.

Last year, Senate Republicans banded together to block a measure that would allow workers to compare salaries without threat of employer retaliation, require companies to explain pay disparities and allow those who claim discrimination to seek monetary damages.

“Pay secrecy fosters discrimination and we should not tolerate it,” President Obama said at the signing of an executive order enforcing similar rules to businesses working under federal contract.

It’s called Open-Book Management, and it’s been around for a while. The concept is that a company opens its financial statements — including salaries — for all employees to see. In doing so, workers better understand how that company functions, and become more vested in helping improve those numbers, particularly if the company builds incentives for them to do so.

A handful of companies have adopted open-book management, most notably Whole Foods. Any employee at any Whole Foods store has the right to go into the back office and look up what any other coworker is paid. Not surprisingly, in addition to the company’s strong growth, Whole Foods has perennially been recognized as one of the best companies in the country to work for.

Pay secrecy fosters discrimination and we should not tolerate it.

President Obama

It’s time to open the books — not just to promote pay equity, but for general fairness. There are many reasons two people working at the same job might be paid differently, but to understand what those reasons are begins with transparency.

In an interview last year, comedian Chris Rock said, “If poor people knew how rich rich people are, there would be riots in the streets.” Last month, Scientific American summarized a number of recent studies that suggests Rock is right. In one, 5,000 Americans were asked to guess the wealth by each fifth of the population. The average American believes that the richest fifth owns 59 percent of the wealth and that the bottom 40 percent owns 9 percent. In reality, the richest fifth of U.S. households owns more than 84 percent of the wealth, and the bottom 40 percent combine for a measly 0.3 percent. In another study, the average American estimated that the CEO-to-worker pay-ratio was 30-to-1. The reality? 354-to-1.

These kinds of misperceptions make the task of addressing income inequality much more difficult. In this case, knowledge really is power. It’s time to break the taboo.