Blogs & Comment

Every company should have a “sunshine list”

Greater salary transparency makes workplaces more productive and fights wage inequality

View of the Ontario Legislature from Queen’s Park

(Antoien Cadotte)

Today Ontario’s “Sunshine List” was issued—the annual disclosure of Ontario public employees whose salaries are more than $100,000.

Its release is a Rorschach blot: some see a list of overpaid bureaucratic fat cats; others a vindictive exercise in public shaming; plenty point out that the list isn’t inflation-indexed and therefore divorced from economic reality. Everyone loves the pure voyeurism of it—though a subset make some ostentatious denunciations of that natural curiosity. Media outlets love the easy pageviews generated by lists about money. (Guilty!)

Talking about money is not pleasant—but like most uncomfortable things, its awkwardness signals that it’s the thing we most need to talk about. And the case for being more transparent about salaries, at all levels, is a strong one. As Deborah Aarts wrote in a recent issue of CB, it’s a good way for firms to promote greater employee engagement:

First and foremost, salary transparency appears to make organizations more productive. A 2013 University of California, Berkeley, study involving participants in an online job market suggests that employees who know exactly how their pay compares to their peers’ exert “significantly more” effort than those who are kept in the dark. Without proof to the contrary, most employees assume they’re underpaid relative to their peers, says Travor Brown, who teaches labour relations and HR at Memorial University in St. John’s, Nfld., and that tends to breed disengagement and mediocre work: “By giving clear pay information, that disconnect disappears.”

[…T]here’s a Machiavellian element at play, too. In the post-Enron information age, transparency is in vogue. Data-hungry millennials, in particular, tend to be suspicious of firms that aren’t forthcoming about things like salary (especially since unfiltered employer reviews are just a search away). If you keep mum about what you pay, there’s a good chance bright, young job candidates will gravitate toward a competitor that has a more open approach.

And it’s good for employees as well, highlighting areas of unfair inequality. The exhaustively documented pay gap between men and women has many contributing factors, but keeping salaries secret is its cornerstone.

Successful adopters of salary transparency audit their payrolls and adjust any inconsistencies first, making for a much more accurate (and less arbitrary) allocation of compensation. Joel Gascoigne, CEO of San Francisco-based Buffer, says this is a key reason his firm publicizes its pay: “It keeps us very honest and helps us reflect on the things we need to change,” such as out-of-whack pay structures, “sooner than we would otherwise,” he said in a recent video post.

Certainly not all employees like the idea of having their colleagues know how many zeroes are on their paycheque. That’s understandable. But it’s also why partial disclosures like Ontario’s Sunshine List are failures: they don’t go far enough, fostering us-vs-them divisions based on picking an arbitrary salary cutoff. It neither corrects glaring inequalities nor does it motivate employees to be more productive. And at its primary goal—curtailing salary growth in Ontario’s public service—it’s a total flop.