In North America, just like in France, large companies must disclose the CEO-to-worker pay ratio. Should all such data become public everywhere? This question is worth considering.
26 May 2021
North Americans are usually not very sensitive to questions about their income. At most, such questions may arouse slight suspicion when asked by a colleague. In 2017, when all listed American companies were forced to publish their CEO-to-worker pay ratio, this decision was criticized… by the concerned organizations, as they feared the reaction of their personnel. A French worker facing the same question will have a much stronger reaction. They will grow pale and start sputtering excuses as they head to the door – without providing any answer, of course. In France, it’s a taboo subject.
And yet, there are many benefits to making the salary grid public. It’s the best way to make rumours and hearsay disappear. It can also help facilitate a pay increase for those who deserve them. It would be a cost-effective measure for organizations that provided transparency to their employees and would minimize or eliminate the opportunity for salary readjustment. Workers would no longer be unjustly split into those who have negotiation skills and those who don’t. Full disclosure would put a definitive end to gender discrimination – there is perhaps no better argument for such a change.
Still, Europe has barely made any progress in this direction. Norway was the most progressive by making all information on salaries available on request from the governmental Tax Administration’s website. In Germany, companies that have over 200 employees must disclose how they set their salaries. In the UK and France, companies that have over 1,000 employees must disclose the pay gap between their highest-paid and lowest-paid workers. But the full disclosure policy is far from the norm.
What makes it such a sensitive topic? One study from the Harvard Business Review may have identified part of the answer. As its author, Todd Zenger explained, humans have a natural tendency to overestimate the value of their work. Discovering that they were “underpaid” compared to some of their peers can be demotivating and even encourage some people to quit. Furthermore, disclosing the highest salaries could lead to waves of protest and risk destabilizing the organization. Therefore, the problem with pay transparency is that it instills a sense of comparison instead of improvement.