Why you should care
Because don’t you want to know what your boss gets paid?
What are some of the ways businesses can minimize the pay gap and what are the predictions for the future? Join entrepreneurs and visionaries as they tackle the issue of diversity at Stanford University on August 30 as OZY explores The Future of Work.
Ken Abosch spends his days digging into financial accounts and numbers that most companies don’t want their employees knowing about — namely, how much you get paid compared with your colleagues. But he’s actually part of a team of data-loving whizzes at the consulting firm Aon Hewitt who get multiple calls a week asking for help to fix issues with pay gaps. “It’s like the doctor who sees patients who are mostly ill,” says Abosch, Aon’s North American compensation practice leader, “because the majority of clients we assist do have some issues that need to be addressed.”
Call ’em the salary whisperers of America. While that’s not their official job title, for Abosch and thousands of other internal auditors across the country, it may as well be. Their so-called pay audits have gained in popularity in the past couple of years as more companies — especially those in the tech sector — take financial information that used to be kept secret and make some of it public. We’re talking about revealing pay gaps for women, minority employees and the average worker whose pay slips pale in comparison to their executive bosses. And this trend for exposing salaries has ushered in a new era of transparency, pushing some companies toward a pledge of equal pay.
In Boston, roughly 100 companies under what’s known as the Women’s Compact have vowed to make equal pay a necessity, with auditors having been brought in to check the salaries of workers at places such as real estate firm JLL, Care.com, Staples and the company behind Dunkin’ Donuts. Although President John F. Kennedy signed the Equal Pay Act in 1963, requiring companies to pay people who are doing the same work with the same salary, salary transparency is still a relatively budding development in corporate America. Searches of the phrase “salary transparency” have steadily risen over the past decade, according to a Google Trends report, while research from the Center for Creative Leadership shows that 60 percent of millennials and 53 percent of older staff now use crowdsourced salary information from sites such as GlassDoor.com.
Tune in Tuesday at 11/10C for PBS’ new late-night series Point Taken to see OZY co-founder Carlos Watson moderate a spirited debate on whether or not salaries should be transparent.
But while Google may provide big data on the topic, the company doesn’t seem keen about the idea of making salaries public — not yet, anyway. It, along with eight other companies, was the subject of a targeted proposal by the activist investment firm Arjuna Capital this year to publicly disclose whether there were gender pay gaps. Natasha Lamb, who as director of shareholder engagement at Arjuna spearheaded the movement on behalf of shareholders who own shares in all nine tech companies, pushed five of them — Intel, Apple, Amazon, Expedia and Microsoft — to get an internal pay audit that revealed they either had no pay gap or made a commitment to close it.
Other companies reacted more “defensively,” says Lamb. Google, which referred OZY to this SEC filing about the matter, is due to vote on the proposal in June but has been advised by the board of directors of its owner, Alphabet, to vote against it. Previously, eBay fought the proposal and voted on it last week, where it failed to pass. The company’s CEO, Devin Wenig, has since announced that an internal pay review will be completed by October. “If we find that we have an issue, we will fix it,” he wrote. For Lamb, however, it’s still not enough. Oftentimes, she argues, an internal audit only includes high-level numbers without a breakdown of bonuses or equity stakes, meaning truly equal pay may not have been achieved. “We’ve been pressing for more detail,” she says. (A spokeswoman for eBay says their internal analysis is “global in nature and considers salary, bonus and equity.”)
Once the dust settles, how well does a system like this work for rewarding hardworking staff, without creating resentment?
While some businesses have publicly made it clear that they want to narrow the gender or race pay gap, others, including Buffer, have gone a step further. The tech company that created an app to manage social networks blew the lid off this debate when it published its entire pay list a few years ago, which supermarket chain Whole Foods and a New York City-based analytics firm called SumAll have also done. Salaries at Buffer run from $35,000 (for a customer support member based out of Cambodia) to $218,000 for its CEO.
Yet once the dust settles over such a disclosure, how well does a system like this work for rewarding hardworking staff, without creating resentment? In the short term, “It’s definitely harder to make sure that as people make progress, you keep on rewarding them and upping their compensation,” says Leo Widrich, Buffer co-founder and chief operating officer (who earns $185,000 a year). But being transparent also means less bias and relying on plain old gut intuition, he adds.
For Joelle Emerson, the head of Paradigm, which has helped companies including Slack, Airbnb and Pinterest tackle diversity, the pay gap is just one area to watch going forward. Traditional analyses, Emerson says, don’t always consider barriers that prevent some people from getting a job in the first place, including how employees are evaluated and how people advance in an organization. Still, there’s opportunity here. Pamela Coukos, for one, just quit her job at the Department of Labor after five years of conducting pay gap audits to go independent. “There’s still a lot of pay secrecy in a lot of companies,” she says. “This is a really good time to be doing this kind of work.”