A Deliberately Opaque Piece

I was thinking about the value of opacity last week, something I haven’t done since I worked in the paint industry. Opacity is crucial in paint but elsewhere transparency is the order of the day. Whether it’s open government, shining a light on corruption or businesses demonstrating attention to stakeholder interests transparency’s credentials as a liberal value and part of a healthy civil society rule supreme.

As part of a package of proposals on directors’ pay last week Vince Cable, Business Secretary, said that companies would be required to disclose the total value of a director’s pay, a further transparent step in this troubled area. Transparent so of course a good thing? Perhaps not unequivocally, I suggest.


Unions have said that greater openness about salaries would help women reduce the disparity between pay for men and for women. How would that work? In the vast majority of cases, it would surely be through levelling up to what men are earning. Women would be able to see what companies are paying and present arguments (or take legal cases) to secure the same. Transparency is a good thing again.

But let’s apply the same logic to directors. By seeing what their peers earn, directors have been able to see what they can negotiate for. The more plain and straightforward the information provided on this – one overall figure now – the easier it is for an individual to see how they compare and to argue for similar treatment to those getting more. Isn’t the same levelling up process going on at this level too? Not quite such a good thing, sure

There is an unhealthy combination of factors favouring the rise in top salaries. The role of recruitment consultants and remuneration committees play a part but I want to suggest that transparency has reinforced this process, aiding the negotiating position of candidates to level up rather than employers to level down. Beyond a certain level for anyone, money is not about what it will buy for yourself or your family but what it says about your own achievement and status. It is inevitable that top executives will measure themselves in this way. Information which gives you a personal ranking fuels a drive to rise up that ranking and press for the status the pay package itself gives.

It is simply easier to play “mine is bigger than yours” in daylight. It is possible to play in the dark but it is a more intimate game requiring knowledge gained in a personal rather than public forum.

So, as someone rather fond of liberal values and civil society, where does that leave me? It means that transparency is nowhere near enough. It is partly that shareholder have to start caring about whether they are getting good value from their directors, as they appear to have done at WPP when they rejected Martin Sorrell’s £6.8m price tag. He claimed, of course, that it was simply in line with the pay of other global executives. The shareholders were sceptical of that and were sure it wasn’t good value. I don’t think we can trust shareholder self-interest to solve the problem of high pay but at least it’s a first step – and a first step in the blaze of headlines and transparency.

About the Author: Elizabeth Parkin
Elizabeth had a 25 year career in management before joining the University seven years ago as Manager for “Pod” Programmes. She also held the post of MBA Academic Director before moving on to becoming Head of Department for Management and Business Systems.