Thursday, April 4, 2013


PAY SECRECYIs it Ethical?
Musings on Business Ethics

A few days ago, at a social gathering, I met a young man who works as an investment banker.

I had heard that investment banking is a lucrative profession.

In my usual loud voice I asked him how much salary he got.

He looked at me aghast as if I had committed sacrilege.

Everyone around us looked at me in disbelief as if I had committed a great faux pas.

To whet my curiosity, I repeated the “indiscretion” by asking whoever I met his or her salary.

I was surprised to see that today’s youngsters are very secretive and unwilling to disclose how much they earn.

I observed this secretive nature, and reluctance to disclose salaries and compensation packages, across professions – ranging from nerdy IT “Techies” to Street Smart MBAs of all hues.

I just do not understand this “cloak-and-dagger” obsession with pay secrecy.

In the 1970’s, after getting our B. Tech degrees in Engineering, all of us in our class took up a variety of jobs, in the government and in the industry, in public and private sectors, in MNCs and PSUs.

Whenever we met we discussed our new jobs – and we freely discussed our pay, our salaries and what perks we got in our respective jobs. There was nothing to hide.

In those glorious “pre-liberalization” days of “socialism” it was considered ethical to be equitable and that is why salaries were comparable whether you worked in the private sector or public sector.

Yes, though the private sector paid more, there was no excessively disproportionate disparity in pay for the same type of work and level of posts between one place and another.

How things have radically changed with the advent of liberalisation and globalisation!

Today the concept of “equal pay for equal work” seems to have been forgotten and we see an obscene imbalance in compensation packages.

Those days, in the 1970’s, Salary Structures were simple – you got a basic pay, dearness allowance, some well-defined perks and, in some cases, publicly declared incentives and bonuses.

Everything was transparent and, to the best of my knowledge, such Machiavellian concepts like “Cost To Company” (CTC), ESOPs, and other “secret” allowances and “hush-hush” incentives and bonuses did not exist.

I feel that “pay secrecy” is a concept which is alien to conventional Indian ethos.

It looks like this “secretive” Human Resource Management Philosophy (comprising elements like “confidential salaries”) has become prevalent in India after 1991, post-liberalization, with the entry of foreign companies who have brought along with them their own distinct organizational cultures.

Can somebody please tell me what is the need for you to keep your pay secret or for your employer to keep confidential the salaries of employees?

Even today, as far as government jobs are concerned, pay, salaries and allowances are public knowledge. There is total transparency in pay scales, increments, and all payments made to employees in government and public sector jobs. I think that there is pay transparency in some large industries and traditional Indian organizations of the “old mould” as well.

Then why have this obsession with pay secrecy in some firms, especially in companies with foreign organizational cultures like MNCs and IT Companies?

It is said that an Ethical Human Resource (HR) Management System must have three attributes:

1. It must be FAIR
2. It must be JUST
3. It must be TRANSPARENT

The concept of pay secrecy violates all these three tenets.

Let me give you an example.

I have a friend whose son migrated abroad to the USA many years ago for his studies and continued to live and work in America.

He was “posted” to India by his company (an MNC).

Though the boy is of Indian origin, since he is based in America, he is considered to be an Expatriate (expat).

I was told that because he is an “expat” he gets a much higher salary and attractive compensation package for doing the same job as compared to his Indian counterparts.

In fact, he also joked that had he remained in India like his brother, or come back to India after his studies abroad, and joined the same firm, he would have been paid much less for doing the same job. 

(Whereas in India, foreign expats are paid more than Indians, the reverse may be true in America for Indian “expats” who probably are paid much less than their local counterparts)

Is this fair?

A fair system will ensure equitable compensation and will provide equal pay for equal work.

What is the justification for paying different salaries to employees of the same company for doing the same work?

Is this discrimination based on nationality just and moral?

In such a scenario you may have a ridiculous situation where a junior gets more salary than his senior just because they belong to different countries.

Is this absurdity not akin to racial discrimination?

I feel that openness is always better than secrecy, particularly in HR Management Systems which must be Transparent.

It has been my personal experience that a Transparent and Honest HR Policy nurtures a sense of Trust and Loyalty in employees.

Secrecy breeds distrust and creates an negative atmosphere of intrigue and suspicion in the workplace.

Such unhealthy and undesirable vibes create a sense of insecurity and disloyalty which in turn cause a feeling of stress in employees.

If there is workplace stress, people may not enjoy working in such an insalubrious environment and this is not conducive to friendly and open interpersonal relationships as well.

I feel that Pay Systems must be ethical and non-discriminatory.

A candid, sincere, fair and transparent HR Management System will inspire a sense of justice and harmony by ensuring equitable, fair and transparent compensation mechanisms for all employees.

Do you agree? What are your views on pay secrecy? Should salary be kept confidential? What are the pros and cons? Why has pay secrecy become the norm in most organizations?

Please comment. I eagerly look forward to your views.

Copyright © Vikram Karve 2013
Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work. 
© vikram karve., all rights reserved.

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Mahesh said...


I work for a MNC and do not like to share my salary. For few reasons:

1. Salary structure within my company and outside may not be fair and comparable. Sharing salaries would make me as well as others unhappy. I mean either I would get a feeling of being underpaid or someone else.

2. From your times, a lot of things have changed. People have become more greedy. If they know how much I earn
- if I am paid well, they may start to borrow from me,
- if I am paid less, if may get difficult for me to mingle with my relatives who earn more. This is cruel but I have seen it happening.
- I earn well still I have difficult time in my family because I stay in India and lot of cousins stay abroad. It is no match, I am repaying my loan and my cousins buy a new flat on most of their India visits. This does not make me jealous, I am happy with what I have. However, it makes it so difficult to be on talking terms with relatives staying abroad, they just don't understand why I want to continue staying here. In a family gathering there are no common subjects.

Jesus, you just left me a window to cry :)

Vikram Waman Karve said...

Dear Mahesh,
Thank you for your views.
You are right - things were different then and money was not that important.
It is natural that there is a change of views as time passes and especially due to the generation gap.
Socialist thinking is out and "crony" capitalism, with all its attendant pros and cons, is in - that is the truth whether you like it or not.
All the Best.
It is good you have stayed back and love your country.

Shrinath Shenoy said...

Hi Vikram,

An IT Nerd earns a paltry sum compared to what his uncles and aunts think he does. A figure of 30k per month looks an amazing figure to the people from the 70s whose valuation of the Rupee is still pretty high, when in reality it has slumped a lot.

I dont have an issue discussing my salary, which is decent but not decent enough compared to the kind of life a middle class youngster is living today. We have nuclear families, and we are expected to buy flats if we want to get married. You already know how much flats cost in Pune and its going to take a lifetime for an ordinary IT nerd to pay it off - unless he jumps from here to there for the sake of money, and remains almost a loser in his field of work.

Another important thing to note is in companies, you have different Units - say one which deals with Retailing client and the other which handles Finance companies. Supposing you and your colleague have been placed in different units. Just because your friend's unit is getting better business to the company, your friend will earn comparatively more, even if he is nothing more than a loser. This may even affect your promotion, as promotion slots are decided based on Unit's performance.

Lateral entrants at the same post earn more and the salaries just dont equalise in the times to come - so much for the loyalty one shows to the company.

In conclusion, today an employee cannot be loyal to a company for long; a company doesnt care for its employees, and the salary structure, as you pointed out, is one which will breed negativity in the work environment.


Vikram Waman Karve said...

You do have a point Shrinath, especially your conclusion about mutual loyalty.