No matter how expertly this is pulled of, human jealousy is still a risk. In particular, because there are more than a few people who think what other people do is less valuable just because it isn't what they do. In addition, I don't think many companies can successfully justify every decision in a satisfactory way to every employee, no matter what decisions they make. Nor should they have to.

Not that I'm defending keeping wages secret. I think it creates more problems than it solves, and that it doesn't even solve this problem in most cases.

Salaries and options were fairly quiet talk. No one really discussed them that I ever heard. Then we started preparing for the IPO. A few documents "accidentally" got included in a public filing. These documents included a list of current employees, their salaries, and the number of options they were granted. There was also one sales employee who had gotten an employment contract that was completely out of the norm of what others were getting paid. All of the sudden salaries and options became a major discussion point among employees.

To make matters worse, prior to the IPO it was determined that too many options had been granted and they needed to rain in the grants. The solution was an 1 for 8 reverse split (meaning that if you were initially granted 8000 options you now only had 1000). This was kind of an icing on the cake morale blow for employees. It didn't help when the stock soared at the IPO and people were comparing what they should have made with what they actually made.

EDIT - fixed typo

Using the same example above, here is where it hits the employee. Let's say on opening day the company opens at $20. Now let's say in the original picture you owned 8000 shares and stock closed that day at $60. You would stand to have made approximately $320,000 ($480,000 - $160,000). However, now with the reverse split you now only have 1000 shares. The stock still opens at $20 and still closes at $60. But now you only made $40,000 ($60,000 - $20,000). That's the downfall of a reverse split.

At least with a normal split (i.e. 2 for 1) you have an upside potential on earnings. This is how a lot of early employees of companies like Microsoft, Apple, Under Armour, etc... have made out significantly well for themselves. With a reverse split they are taking away shares so there is no upside.

The proper comparison would be a share price of 20 -> 60 with the reverse split, or a share price of 2.5 -> 7.5 without. And with those numbers you'll see that the split had no effect at all.

Maybe there's a scenario in which a reverse split screws up the employees. But I don't think it's the one you're describing.

Let's say you have 32,000,000 shares and you want to raise $8,000,000. You would need to price the stock at $0.25 per share to guarantee that raise (32,000,000 * 0.25 = $8,000,000). Now let's say an employee has 8000 shares. At IPO their 8000 shares are worth $2000 if the stock opens at $0.25. Let's say the price goes up 4x, or to $1.00, that day. The gain is $6000 ($8000 - $2000).

To rectify the issue of the $0.25 opening price (major stock exchanges will not allow a stock to open that low and have minimum prices), the company decides to do a reverse split to reduce the outstanding shares and in turn raise the price of the stock. The company still wants to raise $8,000,000 so to adjust the number of shares outstanding (go from 32,000,000 to 400,000) they must do an 1 for 8 reverse split. If an employee had been granted 8000 shares when they started, they would, after the reverse split, only have 1000 shares.

After the reverse split and on IPO day the company now opens at $20 (8,000,000 / 400,000). Now let's say the price still goes up 4x, or to $80. The gain is still 4x, and the employee walks away with a $60,000 gain instead.

Where I think this confuses everyone is comparing the gain pre-split and post-split. You are right in that the gain is the same and in theory the employee neither lost or gained anything through the split. However, from an employee morale perspective the employee still views it as a loss. In the back of the employee's head they took the job under the premise of having 8000 shares and when the company IPOs they begin comparing what they should have had to what they really have after the split (8000 vs 1000 or $480,000 vs. $60,000).

The other part that I have left out is that with the reverse split your strike price goes up. So if you were originally brought on with 8000 shares and a $1 strike, you now have 1000 shares and a $8 strike. I didn't factor this in the math above in an attempt to make it easier to follow.

Hopefully that clarifies, sorry if I made that more confusing. You are 100% right the percentages and the gains are still the same in theory. It is a perspective that causes the loss of morale. That is why I was using my original comparison numbers. I am by no means an accountant or attorney so probably not the best person to explain the accounting aspect of a reverse split. :)

The bottom line is much simpler: before and after a forward or reverse split, everyone has exactly the same share of the company as before. The rest is just an accounting fiction.

Granted, the exchanges enforce some of that fiction with their minimum share prices, and of course in the old days when shares were often traded in blocks of 100 it made a difference in how small a trade you could make.

But aside from that, it's still a fiction.

A reverse split is like saying "So you want to buy some pie? I was going to sell you 16 huge slices, a full quarter-pie each! But I changed my mind. Now I will only sell you four pies."

In other words, it's a psychological/educational problem, not a financial one. The only people truly affected by the splits you described are those who don't understand splits work.

Granted, this problem can be a real one. I had a friend who celebrated with joy any time a company whose shares he owned did a 2 for 1 split. He was certain that the shares would almost immediately climb back up to their previous price, because that was the natural share price for the company.

I tried to explain to him that he had exactly the same share of the company as before and the split didn't affect the company's financials in any meaningful way, but it just never sank in. He bought companies that had a habit of splitting their stock, and avoided companies that just let their share price rise.

The stock reports on the radio certainly don't help with this: "X co is up $6.51 at $327.90, and Z co is up 55 cents at $14.23."

Which company did better today? :-)

In your example, employee would have 100 not 1000 shares post split, and still would gain $6K.

Had that happen to me once and saw others go through it at another company since then that I joined afterwards.

Want to discuss morale killers ? This is a pretty good one

    However, now with the reverse split you now only have
    1000 shares. The stock still opens at $20 and still
    closes at $60.

The only reason splits exist is that people have an irrational attachment to the value of a "share" and expect to see it in a certain range, even though the total number of shares available is a number chosen more or less arbitrarily by the company.

UGH. Having one of those days. It is 1 for 8 reverse split. Sorry trying to do this from my phone and haven't had a full pot of coffee.

I always hear this argument, and I wonder how often it really applies. I have coworkers who do basically the same job as me but get paid twice or more what I do for it. I don't sit around being jealous, I think about how I know it's possible for me to get paid that much and that's something I can aspire to. I suppose in other words, it's information about the salary ceiling. (Of course, that's still an incentive for management to try to make sure I don't know other people's salaries.)

I've never heard anyone, in this environment or at my last job, complain enviously about other people making more money than them. The most I've ever heard on the subject is me and a couple other guys shook our heads discussing another guy who made much less money than we did and definitely deserved more.

You'd be surprised at how petty some (otherwise very intelligent) people can be.

At a former job, the company paid to send some of team A to a conference for platform B ($1100 / head), while some from team C were sent to conference D ($500 / head). When one member from team C found out about the price difference between the two conferences, he started bellyaching and said the company owed him another $600.

*Not saying that being offended is always bad--there are things that one reasonably might be offended by, just that this is one of them.

(Because "there are some X which are Y, but this X is not one of them" is a pattern I recognize as common, and "there are some X which are Y, but this is one of them" is not a pattern that I am familiar with)

I also believe making salaries public are also a good way to fight against gender-inequality in the work place and it makes workers think collectively rather than individually.

People get jealous and can't handle the truth because a huge chunk of people don't even understand how a business works. Especially from an engineering side, it's really hard to swallow the fact that you have all of the skills and actually created the product, yet you will make 10% of what good salespeople make.

Programmers, not so much.

This does not of course mean that the coworkers of that 250k salary think the work is worth 250k. That disconnect which can be difficult to fix will often cause bad feelings and poison the atmosphere.

The correct solution of course is for the company to effectively communicate what is sees as valuable so that employees can work toward creating that value and measure correctly. This is harder than it sounds though.

What's hard: even when Project A is effectively communicated as the most important thing BigCo does, Project B is still essential to BigCo's functioning and BigCo cannot exist without it, so how to counteract Project B employees feeling either devalued or jealous of Project A?

Warehouse employees get paid a bit more than shopfloor employees. Warehouse employees are mostly men. Shop floor employees are mostly women. The jobs are not identical, but they are similar. Shop floor employees include the shelf stackers - they take pallets of boxes of goods and unload these onto shelves. That's very similar to the lifting work that warehouse employees do. (There might be a need for some warehouse workers to have forklift licences, which would explain a small amount of the pay differential).

In this legal case the wages of both group are pretty close to minimum wage.

http://www.theguardian.com/business/2014/oct/24/asda-mass-le...

http://www.theguardian.com/business/2015/jul/09/sainsburys-f...

One way they might address the allegations would be to transfer some warehouse employees to the sales floor and vice versa, providing a better mix, and a good opportunity for employees to see a different side of the operation. Of course, locations may not allow this easily- and may actually play into the pay disparity.

That 15% cut was a lot more than the uk's median wage :-)

The public tax records were too often abused for harassment, political extortion and plain crime such as burglary and fraud so they pulled the plug on online publishing of tax records.

I'm a little conflicted about the last part; on the one hand, why not give notice if someone's been "snooping" -- on the other hand it kind of defeats the purpose of having a transparent system -- how will your boss feel if you look up his/her salary? And should it really matter?

Always thought it was nice that one could check some employee/manager salaries before heading to a job interview. One still can, of course -- with the caveat that some might find it intrusive. But then, would one want to work for such a person?

[1] http://skatt.na24.no/

There are lots of legitimate reasons why Jeff might be effective and well paid, and why it might not be useful to publicize this fact widely. A popularity contest is NOT the right way to allocate pay - among other things, the participants in the popularity contest have no incentive whatsoever to properly evaluate Jeff's value.

I guess it depends on why you are angry and punched that person in the face, did they spit on you, hit your wife, etc? Your analogy here isn't very good.

It isn't an employees job to understand what every other employee does and honestly management trying to justify every salary to every other employee would be a bit ridiculous. Maybe Jeff (or lets say Sarah) has a good salary because they bring in 10x the business as the next best sales person. That is easily quantifiable but lets say Jeff/Sarah brings in only the average income but you can see the growth with their customers. That isn't easily quantifiable and honestly doesn't need to be broadcasted to the whole employee base (especially since employees leave and go to other competitors and would then have a good list to work off of).

Employees routinely keep information confidential from each other because it makes sense to do so. This isn't a bad thing like you make it out to be, companies shouldn't be some open society where everyone gets to know each others business.

Negotiating your salary with out knowing what everyone else was making is stupid. If you're a star performer the goal is to get everyone making what you're making so you can ask for a raise on top of that. (In companies with huge amounts of cash on hand).

The problem with your approach is that it is very easy to manipulate people when you permit a power/information differential like that. You end up saying "the slave is happy with the food we give him; why should we offer freedom?" -- when he's only happy with the food because you've been beating him for so long he's been conditioned into helpless appreciation of your scraps.

You feel you're making a fair salary? Well then what is the harm of knowing your neighbor's salary? Are you going to learn a new meaning of 'fair?' What's the harm in that? That's just updating your priors and giving you the ability to make better decisions with more information. (That anyone would choose to reject relevant information when making decisions is the height of absurdity.)

So in such a situation there's little upside. You already know you're not getting scraps.

But there's a painful downside in knowing exactly who the company thinks does worse work than their direct peers.

But it's often supposed to be, and so salary differences can hurt feelings just as much as if the correlation was perfect. Or they can hurt feelings because the actual reason for the difference is unfair.

>The only people who benefit from salary secrecy are employers, and they benefit greatly.

Is that always the case? Remember, in this scenario we have a detailed knowledge of equivalent position salary, we just don't know which of those thousands of numbers belong to our coworkers. How does that remaining ignorance hurt me in any notable way?

I'm not saying that hurt feelings should override important info, but if the info isn't important, and it's not about you, then maybe hurt feelings should be considered.

Let's say I'm playing a game of poker. I know what my hand is, but nobody else's. You are telling me that I am advantaged simply by knowing the odds associated with my hand.

Great.

Except my opponent across the table can see everyone's hand. And they are telling me I should go all in.

That's why anonymous info isn't good enough: it's only anonymous to the losers.

This is more like knowing everyone else's hands in blackjack.

Please please please do not distort this example by omitting the critical "Jeff in sales".

In the Google context Jeff (Dean) earns all the money they potentially throw at him. And everybody know about his magic qualities. The quotation is Jeff in sales, not just Jeff!

I don't think it's really a SWE- for example -'s concern what Jeff in sales brings to the table. I mean maybe they're friends, or work together, and he knows.

But if he doesn't know, and doesn't think Jeff deserves so much, it's really neither here nor there. It's not up to him.