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Pay Secrecy, Discrimination, and Autonomy

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Abstract

A question facing nearly all private firms is whether they may keep employee pay secret. Many think it is obvious that firms are obligated to disclose a good deal of pay information once we properly appreciate the severity of pay discrimination in our economy and the autonomy-related interests that would be served by pay disclosure. This article puts forth a dissenting voice against the vast majority of recent commentary. It exploits a fissure between reasons we have to support certain coercive regulations and reasons firms have to act in the absence of such regulation. While acknowledging that we may need transparency regulations for firms that fail to act morally, it argues that otherwise moral firms need not disclose pay on the surveyed grounds.

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Notes

  1. Others have made some similar observations, though steeped in the application of frameworks rooted in continental philosophy or Frankfurt School critical theory (Flyverbom et al. 2015). For instance, Roberts (2009, p. 964) observes that, “[t]he problem but power of transparency lies in its use as an instrument of hierarchy, large-scale organisation, and control at a distance.” Transparency is said to lie at the intersection of power and the panoptic worldview (Foucault 1980, 1995), relying on “the twin possibilities of observation and control” (Zuboff 1989, p. 321).

  2. Secrecy is fundamentally “a property of information” (Mahon 2018, pp. 173–174; Scheppele 1988, p. 12), not a property of things. Hence, my definition of pay secrecy does not reference pay per se, but pay information.

  3. The reader may be familiar with President Obama’s 2014 Executive Order 11246, which was widely heralded to be a significant step towards ending pay secrecy (Eliperin 2014). The Executive Order resulted in rules barring federal contractors from retaliating against employees that discuss pay (Calvasina et al. 2015), substantially providing rights to individuals not already covered under the NLRA’s protections, such as managers, supervisors, and other workers in specific industries (Department of Labor n.d.). This is not the kind of pay secrecy this article focuses on, however, which is the top-down intentional concealment of pay information.

  4. I cannot speak comprehensively to the cultures surrounding pay in non-American contexts. But it would seem that social norms encouraging the discussion of pay would be the exception to the rule.

  5. I should note that, as Robert Hughes (2013a, b) points out, it does seem conceptually possible for government to enact non-coercive laws—that coercion is not necessary to law-making. But even a non-coercive law regulating lunches with friends would seem unjustified.

  6. I thank an anonymous referee for drawing this helpful distinction.

  7. I thank Amy Sepinwall for illustrating the importance of this concern to me.

  8. Here, ought implies can. While companies certainly have some discretion in setting compensation (Moriarty 2012), the market economy does impose some constraints (Maitland 1985).

  9. See, also, Waluchow (1988) for a rich smattering of candidates for a standard for fair pay, including: how the existing market would pay; what a theoretical fair market would pay; what a person deserves; how much the work contributes to the success of the firm; how much the work benefits society; the going rate in the same industry for people who do the same work; and adherence to the employer’s pre-existing explicit or implicit wage policy.

  10. There stands a question, however, of what conceptions of fairness my account may exclude. For one, it seems to exclude recently popular legitimation approaches to management ethics (Scherer and Palazzo 2007; Schrempf-Stirling et al. 2016); if compensation must be legitimated through some kind of public discourse (Joutsenvirta 2013), secrecy would seem to preclude such legitimation.

  11. Moriarty (2020, p. 124) argues that the incentive view takes on a “normative logic of effectiveness.” However, this logic only attaches by way of being associated with a demanding view of the corporate objective with a mandate to generate shareholder wealth. While I think Moriarty is right to associate the incentive view with theorists who adopt this kind of shareholder-centric paradigm, it bears repeating that there is no necessary analytical relationship between the two. We have good reason to think corporations have significant moral discretion to direct resources to different ends (Strudler 2017), whether wages are primarily incentives or not.

  12. I thank an anonymous referee for pointing this out.

  13. Since I am only considering in this particular section whether the prevention and policing of discrimination constitutes a reason to disclose pay, when I say something like “the firm does not have reason to disclose pay,” I generally mean, in this section, “the firm does not have reason to disclose pay in virtue of the imperative to prevent and police discrimination”.

  14. Hereafter, when I say “cease discrimination” or “stop discrimination,” I mean with the qualification of “to the extent possible.” I will discuss herein issues relating to the extent to which companies may be limited in preventing or policing discrimination.

  15. We might imagine circumstances in which this is the case. For example, a well-meaning CEO may lack the political power to institute new, costly discrimination prevention measures, but have the clout to enact a policy of pay disclosure. But there is no reason to think that this is the paradigm case.

  16. It should be noted that the particular case of Google might merit a different analysis, given assertions by the Department of Labor of “extreme gender pay inequity” (Shu 2017). I use it here to advance an intuitive point, not to render a final judgment in this specific case.

  17. I thank an anonymous reviewer for raising this worry.

  18. One exception is Moriarty (2009), who argues that executives with fiduciary duties to a firm may have a moral duty to accept only (a version of) their reservation price.

  19. Framing our discussion in terms of dyadic wage negotiations risks conveying an overly simplistic model of labor markets and pay negotiations. Wage determination processes are complex, involving a variety of labor market participants and institutions, most notably labor unions and occupational licensing authorities (Gittleman and Kleiner 2016). The structure and power of these institutions stand to affect trends in pay discrimination in significant ways—it has been argued, for instance, that labor unions provide disproportionate benefits to women (Porter 2013). In this article’s context, how we describe the duties in particular wage-setting environments may vary with the number of parties involved and their respective roles. My hope is that all of the conclusions I reach in discussing duties of employers to their employees here, though, are consistent with or easily transmutable to contexts in which several parties are involved in wage determination. My ultimate conclusion that pay secrecy is not obligatory in virtue of employee rights or interests can be redescribed to include overall labor union interests as well.

  20. This line of reasoning is inspired by a discussion by Taurek (1977), who reasons in one case that if even the weakest of self-serving reasons can negate a supposed obligation, then it is best said that the obligation never existed at all.

  21. Approaches rooted in the positivist organizational justice literature identify the just wage with the perceived just wage (Marasi et al. 2018; e.g., Marasi and Bennett 2016), even promoting ‘informational justice’ as a distinct psychological construct (Scheller and Harrison 2018); but normative ethics maintains a line between perception and reality (Alzola 2019; Kim and Donaldson 2016).

  22. Note that this section engages only with this conditional claim. I do not seek to justify or argue that employers are obligated to provide a living wage. I only ask what their obligations are with regard to pay transparency if this is the case.

  23. Fenster (2010, p. 626 n. 28) notes that, as of 2010, more than 550 Journals and Law Reviews in the Westlaw database used “sunlight” and “disinfectant” in the same sentence.

  24. Popular business articles, in particular, are dotted with endorsements of transparency, often invoking prudential concerns alongside a vague concept of ‘trust’ as a justification for an unconditional imperative for transparency. For selections from the Harvard Business Review, see ‘The Strategic Benefits of Transparency’ (Balter 2007); 'Want Your Employees to Trust You? Show You Trust Them' (Brower et al. 2017); 'Winning in an Age of Radical Transparency' (Goleman, 2009) 'Trust in the Age of Transparency' (Kirby 2012); 'Trust Through Transparency' (Nayar 2009); 'What's Needed Next: A Culture of Candor' (O’Toole and Bennis 2009); 'Why Radical Transparency is Good Business' (Smith and Tabibnia 2012); 'Heed the Calls for Transparency' (Wilkin 2009).

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Acknowledgements

The author would like to thank audiences at the Wharton-INSEAD Doctoral Consortium, Society for Business Ethics, and Academy of Management. He would also like to thank Tom Donaldson, Vikram Bhargava, Alan Strudler, Dan Singer, Tae Wan Kim, Amy Sepinwall, and Carson Young for invaluable comments and discussions. Two anonymous referees also provided comments that benefited this article greatly.

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    Matthew Caulfield

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Caulfield, M. Pay Secrecy, Discrimination, and Autonomy. J Bus Ethics 171, 399–420 (2021). https://doi.org/10.1007/s10551-020-04455-y

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