Why not go an extra step to be fair and make everyone's compensation public, including the founders? Why not open up the cap table to everyone, employed or potentially-employable? Then there's no question as to whether a candidate is getting a good deal.
What could possibly go wrong?
2. In a market where great talent is scarce, you will lose your ability to negotiate if the candidate has a better offer from your competitor. Sometimes bidding up makes sense.
3.More generally,this works less well in any field where there is a high possible variance in ability of folks with same credentials and experience. This is especially true in tech (only matters if you are in the market for top talent, not the median. Burger king doesn't need to care, but Facebook and Google can't survive with median talent). Without the ability to have that variance in compensation, you lose the ability to get top 25% folks, especially when your competitors are not restricted in the same way.
They also have "levels", with compensation tied to a level, so it looks like they've basically removed compensation negotiation from the company. You don't mention wanting to do that. If you do want to do that, something like Joel's setup sounds like it can work out fine.
If you don't want to remove the ability to let people negotiate their compensation, it sounds like you're setting yourself up for unhappy and jealous and resentful employees, because some of your employees will be much better negotiators than others.
Frankly making salaries public knowledge is an egregious invasion of privacy, and a security risk.
A couple companies ago, I worked at a place where you employee "level" was public knowledge and tied to your job description, and determined your base salary level. (A, B, C, D, ...). Everyone got yearly raises roughly equivalent to inflation, etc. Yearly bonuses were based on the letter too.
But everyone had a (more secret) number after their letter, so you might be K5, which provided a lot of leeway for negotiating higher salaries, etc. So you'd know if you were in the same general band as another employee, but one of you might be making 25% more than the other.
This is nice reading for all kinds of scammers. Thus list are actively being analysed by banks and financial institutions when soliciting potential customers, and burglars are literally driving around with thus list when looking at houses to break into.
Until two years ago thus list was publicly available on the internet, but now you have to log in at a government run portal to search them. But everyone can still search anyone.
That surprises me. You could just pick a random home in the right area and hit the jackpot every time.
A fully public database would be interesting for auto-targeting, though. Someone like Amazon could feed it as another factor into their pricing algorithms.
People do care a lot. When thus tax list gets published the newspapers don’t write about anything else for a week :) The data is extensively mined. Maps and list are produced an mass to show things like: * Who are the riches in your area? * Where do the poor people live? * What is the average income in your profession?
For 99% of the Norwegian population, there tax record will be the first hit on Google for their name. If you as a male goes on a date with a girl, you can be sure she has viewed your tax record. So will here parents as soon as they learn your name (there is an app for that).
When thus list didn't required a log in there also was a Facebook app that displayed the income for all your friends.
I worked at a small company a big company bought bought and moved from the finance group to the business development group and kept my salary the same, another business development person who had our key accounts was paid 60% of what I was because she had been promoted twice in a few years. Her salary was rising at double digits a year, but was still far under where her peers were. Getting 12-15% raises every year feels great, until you learn you make a lot less than others. The company was going to easily save over 150k in salary moving her up to the average over a period of years.
Or, and I prefer this, you could not disclose but pay everyone above market rate so they don't think about money, but not so high that it's an issue/fuels the desire for perpetually more.
Not having access to information is one of the things that makes an economy suboptimal, so overall, I think making salaries public should be good.
At least some of the issues in actually implementing the above is the impact of the transition. The economy becomes more optimal if everyone takes this new information to make intelligent decisions about themselves (and not be caught up with pure jealousy type of things), and the resulting shuffling balances the salaries out again according to people contribution/skill levels. During the transition however, a lot of messy things would happen, leading to short-term losses in the economy.
I generally hear that such transitions often have to be slowed down considerably and implemented in phases to not have negative spiraling effects on the economy, like the stock of an underpaying company going down considerably even if the company as such was doing good, or HR salaries overshooting because of the sudden overload that may come.
I highly welcomed glassdoor.com when it showed up.
1 - nobody would get a pay rise because "If I give you a pay rise, then I have to give everyone a pay rise" would be the mantra of managers in an established organisation. Anything less would create arguments.
2 - the ego of every employee. "Oh, right, just because he's an engineer, he's more important than me in marketing ... which one of us improves how much profit you generate?" ... and so for every other class of employee. even between engineers - "I'm sorry, but I'm better than that guy because of X, Y and Z (subjective reasons) and I should get paid more."
The extension of 2 is - "If I don't get paid the same as that guy then I'm not working nearly as hard as I have been ... I mean - what's the point?"
There are employees who are being underpaid and don't have many metrics to look at if they want a higher salary (win for the company). Then there's also that if companies make their employee's salaries public, there will be a more aggressive and obvious effort to poach employees from competition. Potential employees will benefit off of this war, while the companies will be just trying to one-up each other.
Not to say companies don't currently poach employees from competitors, but I think making those figures public would make that much more prevalent.
Biggest one:
More expensive for the company initially and way less secure. Talk about telegraphing to your competition what it would take to poach your top employees!
You would end up with 80% of your staff believing they were underpaid (even if that was not even close to true--perspective is reality)
