How Investors Could Benefit from Pay Transparency or Lose With Salary Confidentiality

Asher Black:

So there's an article in New York Times about, , how New York has joined a lot of other states in requiring, , transparency for salary ranges, for job postings. And one of the first things that comes up for me is the number of workarounds. That companies are resorting to, to stick to, , pay confidentiality is sort of the polite euphemism we use for non-transparency around pay ranges.

One of those is that they're, they're going ahead and obeying, they're doing the, the postings, but they have salary ranges in the hundreds of thousands of dollars of, of margin. So, for instance, , They'll put a posting out and they'll say The pay is between 100 K and 500 k, and of course it is. But that gives you no reasonable idea about, , about what the pay is gonna.

Another is that they're using recruiters to do end runs around the system by not posting in the first place, but having recruiters sort of do the head hunting. And if the applicant, , asks about the, the pay range, they either accidentally get disconnected or they defer the question deflect and, and don't answer, et cetera, and try to recruit, , without disclosing that.

And of course, this preserves the ability. For subjective, , pay offers. First size the person up. See if they're a lot like me. Do I know, like, and trust him? , does he, you know, what location is he in? Is he in Alabama? Is he in , Los Angeles? Is he in Pakistan? Does he look like me? Et cetera. And then, , offer a pay that I, I think I can get away with offering, et cetera.

So, , in, in many ways this is like when, , a fir firms post a job for compliance purposes and they have no intention of hiring somebody in the open market, but their investors require them to post jobs to the open market, so they theoretically get the best people. But they already know somebody, or there's already somebody in the company that they totally intend to give the job to.

So they kind of just keep leading applicants on and snowing them. They do the same thing with RFPs also. They, they put out an RFP as though they're open to any vendor that could provide the best service for the best price. And of course this pleases investors, but what they really do is they know who they're gonna choose.

They've already got it sewn up, so they just waste these other vendors' times, et cetera. And in many ways, , Pay transparency would support, , investors and mitigate a lot of the social issues we have, , because, , then we could see the value of what we're hiring and what those jobs are and what they contribute to the overall profitability of the company.

But, , rather than do this, companies are sort of stringing us along by use of these other mechanisms for obscuring, , pay transparency.

Steve Pruneau:

Yeah. I don't see that changing either. , regulators can create whatever apparatus they. , this is gonna get resisted to the end. . So executives, middle management, have everything to lose by being transparent about how much they get paid.

I mean, they're, they're gonna resist this, the way China resists democracy. China does not want to release that control and it, and that's what happens in in pay in a pay transparency. Situation. So any product or service that has opaque pricing, you can abuse. Take an advantage, take advantage of, of the buyer or seller, and you know, it, it creates inequality and that's what executives and management want, right?

They wanna earn a lot and do as little as possible generally. and, uh,, kind of keep that deal going. So yeah, I see all kinds of ways of passive resistance. Like, ooh, no, no, no, no. We we're gonna comply, but not, not, not fully .

Asher Black:

Yeah. It's like the life. Boat keeps nudging at the edges of corporate management saying, you know, what do you really add versus what it costs to keep you on board?

And, , people will do anything they can not to be, , thrown out of the lifeboat. , you know, really, you, you we're top heavy with high paid management, et cetera. But I, I find it interesting, you know, of course it's, it's a well known, , fact that firms pay differently, , typically, , based on location or other factors.

, I do know of a firm, , based here in New York City, but it's an international firm. It's in something like 50 countries and, , that pays the same regardless of location. So they've made wealthy people in Pakistan by paying them the exact same salary for the same work as, , someone working in Dallas and paying that person who lives.

Quite affluently in that economy, the same as they, they're paying somebody who lives in Seattle, which is a, a more robust economy. , and, , they're unique. They're kind of a unicorn for, for doing this kind of thing. But it sort of begs the question of, you know, location in many ways where one is located as a worker.

, is a, , euphemism, , for one's ethnicity. , and that brings up the issue also of gender and other subjective social judgments about hiring people that look like me, smell like me, et cetera. Sound like me, you know, whatever feel like me. We tend to hire people we know, like, and trust. That's true. But that means we also tend to hire people that are a lot like us and we tend to pay them more, is the, the dirty truth of it.

We tend to offer what we think we can get away with, , based on a person's location or based on whether we think they'll feel lucky to get the job, versus somebody who's gonna feel entitled and be demanding and go elsewhere and look for a job that pays more and who negotiates harder. , so I find it interesting.

HR departments are sort of on board, , with this.

Steve Pruneau:

Well, HR is an enforcement mechanism, right? They're not actually there to look after your personal wellbeing. They're not the company's internal psychologist or counselor . They're, they're, they're an enforcement agency to keep the company in compliance and also enforce company policy.

What I really find interesting. A large number of HR professionals are women, and they're essentially the prison guards who are enforcing the policy that your pay is confidential. It must not be disclosed. Some policies explicitly say you must not share your pay in conversation with colleagues, and you know, it's under the guise of confidentiality, but reality is we don't want executives and managers to face that uncomfortable question of, hey, You're making this a lot more than my friend makes, and yet my friend contributes a lot more value.

Why is that? So nobody wants to face that in a, in a company town hall discussion. So we have women enforcing a system that inherently perpetuates gender inequality of. .

Asher Black:

Yeah. I find that interesting too. , it penalizes women, it penalizes people of color. It penalizes, , people based on culture and where they live, and a whole host of other subjective judgements that I don't think we're even fully exploring, , based on the fact that.

Pay transparency just is a one size fits all. Cover it up and sweep it under the rug, , mechanism. , pay non-transparency for, for making that possible. It makes possible every level of inequality. But what I find interesting about this is the fact that investors are not rising up, , to, to call foul. , so just like, , investors are saying to.

Yes, you've cut some pay and you've cut some, uh,, employees, but you haven't gone deep enough. You probably have a lot of bloat. , cut more. I would think that investors would want to look at the value of work, , and the value of people and make a comparison, you know, so first, , It's not just disclosing the pay range, but why not just disclose the pay?

Why not just make it a, a company policy in any well-run company that everybody knows exactly down to the, the penny what every other employee makes. And that would allow investors to decide, you know, is the company being led and managed in a way that is, is most fruitful for our profit share? Is, are the decisions being made about where we put the company's dollar are, are they beneficial to, to me as a shareholder, do they represent solid leadership or do they represent, , bloat?

, I, I think an activist investor would be interested in that question, but what the question that comes up for me, Should we be valuing the work and paying everybody the same because the work is the same regardless of who does it or is there anything to this, , usual comment that our people are our strength, we value our people, and therefore, because does that not perpetuate the inequality that says, whoa, we pay different people differently because we value different people differently.

The work is the same. Maybe people shouldn't be valued differently. Maybe it's not people that we're valuing. Maybe it's work that is the basis of value, and that's simply a commodity that we can price and investors can look at.

Steve Pruneau:

Oh, you're now, you're tapping my inner amateur economist nerd. This is all about pricing and efficient markets.

Every company is a market for work. And yes, you're right. If I was an in. . If I was an activist investor, I would be all over this. I'm surprised that they haven't picked up on it. And here's, here's the deal. So once you have a market that, is that where the pricing is very clear, people, what do they do? They compare.

Trade-offs, quality versus price? Quantity. Do I, am I a price driven person? Is it a sort of a commoditized type of work, or am I going for quality? This person's a real innovator and we need them in this spot. So I think what would happen. and certainly what happens in other markets as you make them more transparent, everyone participates in those trade-offs and comparisons, which is a hell of a uncomfortable position to be in if you're a manager or an executive , because people are comparing your output, what you've produced versus what you're getting paid.

But to your point, I don't think it'll be down to like, for like, you know, the price of gasoline is the price of gasoline and there's not a heck of a lot of value difference. There's gonna be with people and personalities and talents and experience, there's going to be a, a big range of what the group might say.

Is is worth it. And in the end, and what, no matter what group I'm in, there's always people who you say, yep, that person's totally worth it, or, yes, that person should lead this organization next. And it's kind of hard to put your finger on all the particular reasons why, you know, the confidence they convey, the vision that they have, but those subjective factors, that drive social organizations and work and jobs are part of a social organization, , that will be part of the mix.

So I don't, I don't think it'll be stripped down to just price for work except at the very lowest level trade, like transactions, but in the middle where the innovation happens. , I think it's gonna be highly subjective, but it will be a consensus of the group. Mm-hmm. .

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