Should salaries be kept secret?

Organizational Behavior
November, 2010

Bhavya Khurana (10DCP- 065)

Kapil Agarwal (10DCP- 071)
Manu Vijaykumar (10DCP- 076)
Mathew Joseph (10DCP- 077)
Mridul A. Greenwold (10DCP-078)
Sahil Panjwani (10DCP-089)
Contents

1. Brief Overview of Subject companies

• Bharat Petroleum Corporation Limited 
• Kent Builders & Developers
2. Research methodology
3. Inferences
• The Case for secrecy of salaries
• The Case against secret salaries
4. Application of equity theory
5. Case studies
 Bharat Petroleum Corporation Limited

Bharat Petroleum Corporation Limited (BPCL) is one of the

largest state owned oil and gas company in India.

It is involved in the refining and retailing of petroleum

products.

Fortune Global 500 rank of 287

BPCL is often referred to as an “MNC in PSU garb”. It is

considered a pioneer in marketing initiatives, and employs
“Best in Class” practices.
 Kent Builders & Developers

Kent Builders & Developers are creators of premium

residential and commercial projects since 1987.

They have covered the entire gamut of construction ventures in

residential projects, integrated townships, IT parks,
commercial complexes and hospitality sector.

They have received the Sky Lounge award and the Bajaj House
award
Research Methodology
We have considered a sample of twenty people from the two companies
• Kent Developers had the policy of keeping the salary secret
• BPCL revealed the salary of their employees

Information was gathered with the help of a questionnaire prepared

which included five questions which are as follows:
• Should salaries be kept secret?
• Will you reveal your salary to peers if it is kept secret?
• What are the benefits of keeping the salary secret?
• What are the benefits if not keeping the salary secret?
• Any other comments?
Agreement with company’s policy
Disagree
30%
70% respondents supported
their company’s policy.

Agree
70%
Case ‘for’ secrecy of salaries
 Case ‘for’ secrecy of salaries- Kent
Name & designation Reasons 4
M. F. Balasinorwala Prevents increase in Avoids conflicts
CEO Worker rivalry within the company
Namita Shirodkar Avoids conflicts within
Secretary the company 1
Lose faith in the
Lose faith in the company
Keerthi Reddy Senior company
Manager Workers must be on good
terms with each other 1
Create bad blood among Maintains goodwill
workers
Pradeep Nagpal 1
Maintains Goodwill Avoids
CFO
towards each other Confrontations
Avoids Confrontations
Dominic Roderick Waist of company time of 2
Head of Security responses There is no benefit
Does not effect the of disclosure
Hussain Daruwala
performance
Gaurav NagpalOffice Leads to unnecessary 1
Leads to
Administrator power struggles unnecessary power
struggles
Case ‘for’ secrecy of salaries- BPCL

2
Name & designation Reasons Prevents employee
Atul Chowdhary Prevents employee conflicts
Office Administrator conflicts.
Prevents loss of 1
Prevents loss of
Archit Dhingra company’s reputation. company’s
Head, Marketing Strategy Prevents loss of working reputation.
time.
Prevents loss of 1
Prevents employee
conflicts. working time.
Rajiv Sharma
Prevents loss of working
Junior Manager, Accounts Prevents hurting 1
time.
Department morale in the long
Prevents hurting morale
in the long run. run
Top reasons in support ‘for’ salary secrecy

1. Avoids employee conflicts/maintains goodwill

2. There is no benefit of disclosure/waste of time
3. Disclosure leads to unnecessary power struggle
Case ‘against’ secrecy of salaries
Case ‘against’ secrecy of salaries- Kent
Name & designation Reasons
Akhil Khambata Openness and trust with 3
COO each other which leads to Encourages openness
a better work
environment
and trust leading to
better environment
Encourages confidence
among workers
Anushil Kadam Secrecy encourages
CMO rumour, gossip and
misinformation
Saifuddin Poonawala Valuable way to measure 2
Marketing Executive one's performance with
one's own peers A way to compare
performance with
Better for companies
with large workforce and peers
departments with
constant competition
among them
Case ‘against’ secrecy of salaries- BPCL
Name & designation Reasons
Ashok Kumar Creates trust in the 2
Creates trust in the
(sales exec) organization
organization
Create employee
Amit Sarkar
confidence in the
(Sr. manager HR) 2
organization
Prevents bias
Neha Das Prevents bias
(Sr. manager mktg.)
2
Udit Saluja Prevents bias Prevents rumors
(Marketing exec) Prevents rumors
Prevents spreading of 1
Mayur Bhatia rumors Employee’s right
(sr. manager HR) Employees have a right
to know 1
Sandeep Mishra Salaries will become fair Salaries will be fairer
(Jr. manager acc)
Dhruv Dhawan Helps distribute work 1
(business strat div.) fairly Leads to fair
distribution of work
Top reasons ‘against’ salary secrecy

1. Creates an environment of trust in the

organization
2. Prevents bias/leads to fairer salaries
3. Prevents spreading of rumors
Application of “Equity Theory”

1. Some companies practice secrecy to avoid inequity

• Disclosure leads to referent comparison leading to
possible de-motivation.

2. Other companies tries to use inequity as its strength

1. Disclosure leads to competition which provides
motivation to improve efficiencies
Related cases
Transparent salaries lead to better working environment

Semco’s “no secrets” policy

Brazilian diversified-interests company Semco offers a unique template for profits

through openness. Among a range of “workplace democratisation” strategies
implemented during the 1980s, all salaries are transparent and debatable.

The division of profits between workers and managers is fixed; and even
expenditures need to be approved by a committee of workers’ representatives.

Far from a fiscal disaster, Semco has become well-known throughout the world for
the success of these initiatives. Its CEO Ricardo Semlar is a respected HR thought
leader and visiting scholar to Harvard Business School.
Related cases

Disclosure leads to fairer salaries

Singapore’s National Kidney Foundation (NKF) scandal of 2005

Whilst the $600,000 a year pay packet for CEO TT Durai was certainly higher than
most would have expected, it was revealed during a defamation trial that he had also
received annual bonuses of between 80% and 100% of that amount.

“Peanuts”, one observer had remarked – but perhaps the real problem was the
surprise and secrecy. Had NKF and its CEO been transparent about the pay and
other expenses, would the donating public have felt such a betrayal of trust?
Related cases

Salary secrecy avoids employee conflicts

Case of NYSE chairman

Richard Grasso, chairman of the New York Stock Exchange, quickly went from folk
hero, for the way he got the exchange running again after the terrorist attacks of
September 11th, to the incarnation of corporate greed when it was revealed that he
would be awarded $140m in accumulated benefits this year.

Mr Grasso tried to stem the tide of outrage by agreeing to forgo another $48m due
to him, but that appeased no one, and he was forced into an ignominious
resignation.
Thank you