San Francisco tech start-up Buffer has been making waves with its transparency campaign, jump starting a national conversation about salaries and, by implication, the way businesses conduct their business in this country.
“We hope this might help other companies think about how to decide salaries, and will open us up to feedback from the community,” CEO Joel Gascoigne wrote in a blog post published on the company’s website Thursday. See the full post with published salaries here. By creating a transparent formula and paying above market rate, Gasciogne says he hopes to promote long-term commitment from employees. “In Silicon Valley, there’s a culture of people jumping from one place to the next. That’s why we focus on culture. Doing it this way means we can grow just as fast—if not faster—than doing it the ‘normal’ cutthroat way.”
The move is a radical departure from the normal but profoundly unjust practice of concealing salaries from other employees and the public in a country with a growing income inequality problem and a troubling trend of executive compensation that tops all other advanced industrialized countries. Despite the Great Recession and ongoing budget crises as a consequence of financial deregulation and corporate corruption, executive pay was 354 times greater than the average American worker’s salary.
In addition to regulatory reforms on the financial and banking industries the Dodd-Frank Wall Street Reform and Consumer Protection Act now requires companies to disclose their CEO-to-worker pay ratio. The SEC proposed the following rules to implement the law:
- Section 951 requires advisory votes of shareholders about executive compensation and golden parachutes. This section also requires specific disclosure of golden parachutes in merger proxies. This section further requires institutional investment managers subject to Section 13(f) of the Securities Exchange Act to report at least annually how they voted on these advisory shareholder votes.
- Section 952 requires disclosure about the role of, and potential conflicts involving, compensation consultants. This statute also requires the Commission to direct that the exchanges adopt listing standards that include certain enhanced independence requirements for members of issuers’ compensation committees. The Commission is also directed to establish competitively neutral independence factors for all who are retained to advise compensation committees.
- Section 953 requires additional disclosure about certain compensation matters, including pay-for-performance and the ratio between the CEO’s total compensation and the median total compensation for all other company employees.
- Section 954 requires the Commission to direct the exchanges to prohibit the listing of securities of issuers that have not developed and implemented compensation claw-back policies.
- Section 955 requires additional disclosure about whether directors and employees are permitted to hedge any decrease in market value of the company’s stock.
Hopefully, the recent action taken by Buffer to make transparent the ratio between its executive pay and staff will help facilitate this national conversation about establishing appropriate limits to executive salaries and what to do about the more troubling question concerning the unsustainable growth of income inequality in this country.