Who Benefits From Keeping Salaries Secret?

Jan. 16, 2008— -- The average American office is a place filled with secrets. None of them is more guarded -- or arouses more fascination -- than other people's salaries.

Who wouldn't love to know what a colleague is worth to his or her employer?

Asking about, or revealing, a salary is an entrenched social taboo. But now it's time to bring paychecks out of hiding, financial expert Suze Orman says.

"I think salaries should be posted," Orman said. "Every salary. From the highest down to the lowest. Because then somebody knows what they're worth."

Finding out that someone doing the same job is making more money can be catastrophic for office morale. But Orman says it's the employer who benefits from salary secrecy.

"They can pay you a lot less and pay somebody else a lot more if nobody knows who's getting paid what," she said.

Orman, whose latest book "2009 Action Plan" tops the New York Times' Bestseller's list, says that for generations, keeping salaries secret has made it easier for corporations to protect their bottom line and to discriminate, particularly against women.

Former Goodyear Tire employee Lilly Ledbetter says she's a perfect example of that.

On her first day of work in 1979, she says, she was told never to discuss her salary with anyone. And, for almost 20 years, she never heard anyone at the plant discuss their pay.

Although she suspected she might have been making less than her male co-workers, it wasn't until someone left her an anonymous note that Ledbetter knew for sure. The note listed four people's names and their salaries, and showed that she was earning up to 40 percent less than her male colleagues with the same job.

"I was initially humiliated," Ledbetter said. "I felt degraded. I felt like I wanted to hide and I did. I went into the ladies' lounge and sort of regrouped and got my composure."

Soon after her discovery in 1998, Ledbetter sued Goodyear, which denied discriminating and told ABC News it has no policy prohibiting employees from sharing information about their salaries.

In a case that went all the way to the Supreme Court, Ledbetter lost, on a technicality. In order to have standing to sue, she would have had to bring her case within 180 days of the decision to pay her less than the men, although it wasn't until years later that she received the note revealing her coworkers' salaries.

Ledbetter's case led to the The Lilly Ledbetter Fair Pay Act, a bill has been re-introduced to Cogress after initially failing to pass in 2007. If the bill is passed, the act would change the law to start a new 180-day statute of limitations with each paycheck.

To Tell or Not to Tell

Orman says there are millions of Ledbetters in the United States "because employers can't afford to let people know what other people are making. If everybody got a pay raise, if everybody wanted more, because they deserve more, what would happen to earnings? What would happen to the bottom line?"

Orman says employees could protect and empower each other by sharing salary information and confronting a boss if there are major discrepancies.

But in the "to tell or not to tell" debate, others say there are downsides to being so open.

Human resources consultant Michael Carroll, who is the author of two books about surviving in the modern workplace, "Awake at Work" and "The Mindful Leader," said employers should be open about how they determine pay but cautioned that sharing salaries at work can have negative repercussions. Many of the things that really distinguish excellent performance are not easily quantified, he says, and people tend not to take into account other perks like benefits and bonuses when they're comparing salaries.

"I have almost invariably seen that when people talk about their salaries in business settings, it almost invariably creates problems and misperceptions and antagonism," he said.

There were some unexpected repercussions a few months ago, for instance, when the boss at a small company in Madison, Wis., decided to put all her employees' salaries on display.

An Overpaid Worker

The young staffers at Penelope Trunk's The Brazen Careerist, a Web service that advises companies how to recruit and retain younger workers, say they have none of the older generation's hang-ups about revealing what they're paid.

"Don't come to work for us if you don't want everyone to know what you're making," said the company's youngest employee, Dan Healy.

Earlier this year, Trunk called everyone into a conference room where she jotted down all of their names and salaries on a board.

But, for all eight employees to see, it turned out there was a discrepancy.

"A lot of people brought up that one person was overpaid and everyone kind of agreed on it," Brazen Careerist co-founder Ryan Healy said.

Soon afterward, Trunk lowered that employee's yearly salary from $120,000 to $85,000.

"Everybody makes mistakes with how much they pay people," Trunk said. "But if everyone keeps it a secret, you can't really see where the mistakes are and no one has to fix them."

Too Much Information

Trunk says it's true that, in essence, she used peer pressure to convince the employee to go along with the pay cut.

"But that's really what all of corporate America is," she said. "It's all about the market telling them where they deserve to be and them being slapped in the face a lot. ... That's how life is."

The employee in question, who has since been laid off, declined to comment.

Opponents say making salaries transparent is a recipe for mayhem in the office. But financial expert Orman disagrees.

"Don't you think you should know what it's really worth at the place that you're working, what other people are getting paid for the job that they're doing, so that when you go in to talk to your boss, you have true material to say, 'I deserve more money'?"

In a tell-all world where talking about salaries could be the last taboo, you might want to ask yourself a question.

Are you curious enough about a colleague's salary to gladly share your own?