Welcome to the Compensation Roundup, where we bring to you the hottest news in comp! Sample what’s happening in compensation right now, get in the know and grab some conversation starters. This week’s topic: Loves, Lies and a Game of Horse.
No Salary Negotiations Allowed
The Low Down: Banning salary negotiations for all are appearing rapidly to attempt to close the gender wage gap.
That’s a Good Thing, Right? Well, maybe not. The gender wage gap is real and needs to be solved, but banning salary negotiations probably won’t do the trick. Some think the idea is based upon the stereotype that women are bad negotiators. Doesn’t do much to boost equality. Research says that women are, in fact, less likely to negotiate a salary and often accept an initial offer. It’s rumored that those who do negotiate are often looked down upon for wheeling and dealing.
So, what works? Find the level of transparency that is right for you. Laying all the cards on the table for everyone to see may not be the answer for you, but providing insight to how you determine pay may level the playing field and silence assumptions.
Determining CEO Pay Ratio Isn’t So Simple
The Lowdown: The SEC (US Securities and Exchange Commission) passed a new rule that publicly traded companies must disclose the ratio between their salary and the median employee wage in their company. The ruling requires the head honcho to report how he stacks up against the average Joe.
A win for pay equity, but not as simple as it appears. The discrepancy of pay of the CEO to the rest of their workers is a red hot topic and a representation of extreme inequality of executive pay and part time pay. Large corporations, especially in the retail industry, are paying CEO’s well above six figures and on average 373 times more than their average worker, who they are fighting to continue to at a low minimum wage and are refusing benefits to cut costs. This ruling is meant to shine a spotlight on the biggest culprits of this crime and open the door for public ridicule, but the calculation of the ratio is not only difficult, but may be inaccurate.
It’s just crunching numbers, right? That’s one of the arguments for the SEC ruling—advocates claim that business should already have this information, but businesses argue that this calculation will cost more than $100,000 and take thousands of hours. Additionally, some predict that disclosing the ratio will crush employee engagement causing a reduction in productivity and an increase in turnover. Ouch. Even worse, if the ratio comes out low, it may give companies a stance to increase CEO pay—not a great solution for narrowing the gap.
Equity Compensation is a Game of Horse
The Low Down: Copying someone’s comp plan is like playing a game of H.O.R.S.E and assuming every shot is done from the free-throw line—unimaginative and easy to imitate and beat.
Stay with Me: Dan Walter, President and CEO of Performensation and a contributor to Compensation Cafe, compares compensation equity to a game of H.O.R.S.E in which the winner is likely to be the one throwing out Harlem Globetrotter like trick shots, while the loser continues to attempt to win by standing at the free-throw line. Basically, compensation equity plans need to include some flare that is core to your organization.
The Gist: A good comp plan is your comp plan. We can’t all be Michael Jordan—just because you study the shot, doesn’t mean that you will have the same finesse when attempting to replicate it. Make your equity plan unique and fit for you and you’re more likely to win the game.
Get in the know: What to say when an exec suggests raising the level of pay for all employees—take a lesson from Gravity. When all salaries go up regardless of employment, employee engagement goes down.
Alrighty, partners. We hope you enjoyed this edition of Compensation Roundup. Be on the lookout for us to rope in more hot news in compensation!
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