Bargaining power does not equate to fair playing field

June 1, 2015

Reddit CEO Ellen Pao’s establishment of a new policy that no longer allows new hires to negotiate their salaries is attracting attention-and some praise.

 

“What is negotiation but the accumulation of small lies leading to advantage?”

-Felix Dennis

 

“Ellen Pao is swiftly emerging as the new face of feminism in the United States,” declared a recent article in the business/finance literature.

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That name may ring a bell to some readers because of Pao’s recent lawsuit against her former employer. She sued for $160 million dollars ($16 million in lost wages and $144 million in punitive damages) after not being promoted within one of Silicon Valley’s biggest venture capital firms, claiming that the decision was the result of gender discrimination.

The lawsuit received a lot of attention in the press because of the facts that sounded less like something from the business school literature and more like something in “Playboy” (or so I imagine).

Numerous salacious details came out in the testimony, including romantic trysts and employees wearing bathrobes showing up at their colleagues’ hotel room doors. These are the details inquiring minds want to know. The jury ultimately weighed in by deciding that the plaintiff had not been a victim of gender discrimination.

Off the table

Pao is currently the interim chief executive officer of Reddit, an entertainment, social networking, and news website. What is attracting attention and some praise is Pao’s establishment of a new policy that no longer allows new hires to negotiate their salaries.

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“We come up with an offer that we think is fair . . . we aren't going to reward people who are better negotiators with more compensation," Pao explained.

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In an article about this change, “Pao defended her move based on studies that have shown that when women negotiate, they don't fare as well as their male counterparts.”

According to a study by Linda Babcock, a professor at Carnegie Mellon University, "when women negotiate, both men and women are less likely to want to work with them. Men, on the other hand, are much more respected for their negotiation skills. For women, it's generally a lose-lose situation."

What’s fair is fair

I agree that this approach has a lot of merit. Why shouldn't people earn a fair degree of compensation, in a transparent manner, for their work, and why should a company that has ten people doing the same job be paying them ten different amounts?

In an ophthalmology practice or academic department, should hiring a new associate resemble a visit to a car dealership, in which an applicant willing to delay and engage in protracted discussions be rewarded financially relative to his or her equally well-trained and productive colleague?

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How about a system that clearly states how base and bonus compensation are determined and let employees, through their actions and measurable productivity, determine their compensation, irrespective of the number of X chromosomes they may possess?

 

Reference

http://finance.yahoo.com/news/reddit-CEO-ellen-Pao-no-salary-negotiation-194418442.html