Why Do You Keep Your Salary Secret?

The downside can be that people tend to overestimate what coworkers make.

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And what was the response?

Well, they didn't like it. Only time will tell whether it was better to say it in advance or let them find out by accident. So if a company is upfront about pay, it has to be prepared to defend it.

Yes, and my argument has been, from an organizational point of view, that that's good. You want people to challenge your pay system, because maybe they're right. Maybe you really are doing a bad job and getting that feedback directly—and based on valid data—is a good thing because it can stimulate you to improve. CEO salaries are routinely criticized, but they don't seem to be changing.

The problem with executive compensation is that there is no countervailing force. There is nothing really working to hold it down. The outrage that comes out annually as the proxies come out is about the only force that is acting potentially to push it down. There are no shareholder votes. Board members are often CEOs of other companies, and most of them are smart enough to realize that if their neighbor gets a raise, then that raises the overall compensation level for executives. The other killer is: You don't want to be below market, do you? For your executive comp? You want below-market executives? Of course not. So we've got this never-ending upward spiral of compensation.

One common dilemma is: How do you measure performance? Not surprisingly, executives say: Well, that depends. If there's a downturn, did we go down less than the other guys? And if it's an upturn, maybe I didn't perform quite as well as the other guys, but look at the extra shareholder value that's been created.