I recently had a post about “When Can You Talk About How Much You Make?“, and I recently followed that up with a post on the Yakezie about “Do You Really Want To Know How Much Others Make?“. The discussion was started when Financial Samurai had a great post about why we should never tell anyone how much money we make.
What do you think? Are we too secretive about our finances in the Western world? Here is some of what I had to say:
The advantages of a more transparent society
Pay would be more closely tied to performance. What often happens with companies is that some people are friends with the boss, or some people just happen to have been around a long time, and during better years they were awarded big raise after big raise. After some period of time, their pay is out of line with their peers.
This isn’t such a big problem so long as newer employees, who may be working harder and doing more, don’t know about the injustice. Eventually, though, word gets around, whether accurate or not, and because everything is so hush-hush, HR and management don’t react until after many star players have already left.
What if things were more transparent?
- The company would have to adjust pay to actual performance. Simple longevity or being friends with the boss wouldn’t be enough.
- The company would have an easier time attracting and retaining star employees. They would have to justify giving a higher salary, of course, but these employees would be motivated to work harder, since they would know the boundaries of what they could achieve if they applied themselves.
It’s simple: Those who believe they are giving back more than they receive will move on to greener pastures, while those being fairly compensated or those who are receiving more than they give back will stay behind. The company, and the shareholders by extension, lose out.