Damn the Law (Disclose Your Comp)

With Illinois, Maine, and New Jersey jumping on the bandwagon in recent months, there are now 17 states that have enacted legislation prohibiting employers from asking candidates about current or past compensation, including benefits or bonuses. Similar laws are in effect in local jurisdictions across 20 states, while legislation known as the Paycheck Fairness Act has been introduced at the federal level.  

The admirable goal of salary disclosure bans is to narrow or close the longstanding gender wage gap While it is up to the individual, savvy IT executives are choosing to disclose salary history, despite the law. Here’s why:

1. They recognize that sharing compensation expectations without compensation history may backfire.

There are many reasons why IT executives may currently be paid below market. They left the workforce for a few years and fell behind their peers. They remained with the same company for a long period of time and didn’t enjoy the financial benefits of switching jobs. For CIOs, CTOs and those in similar roles, whose compensation often includes significant corporate equity, they may fall below market if the firm is not performing. In these situations, they may be inclined to share compensation “expectations” rather than current compensation. The thought is that if the candidate believes that he/she is currently being paid under market, then the hiring company has an obligation to ensure that these inequities are corrected. Unfortunately, it doesn’t typically work out this way. 

When an IT professional vying for an executive-level position shares only his/her expectations, recruiters and employers may assume that the “expectation” is highly inflated and being used as an anchoring tactic for negotiation. On the flipside, they may assume that the candidate’s current compensation is higher than it actually is, preventing the employer from making an offer because the “expectation” is above what the company can provide.

There is also a bit of psychology in play with this approach, as an “expectation” may be interpreted as a “demand.”  Although in line with the law, a candidate who says, “These are my expectations,” may unintentionally come off as arrogant, presumptuous, or irrational. Instead of putting him/herself in a strong negotiating position, he/she may put the employer on the defensive or may be taken out of the running altogether. Furthermore, a candidate who shares a vague compensation expectation may be viewed as hard to work with, while a candidate who is transparent about history and expectations is more likely to establish trust and build a stronger rapport with the company.

2. They don’t want to end up with a low-ball offer.

When an employer makes an offer for an IT executive without knowing salary history, the offer is likely to be at the low-end of the pre-determined range. This does little to help a candidate who is already below the pay grade.  On the other hand, if a candidate whose compensation is better than market average receives a low-ball offer, he/she is now forced to begin negotiating from a low anchor point, which may result in a steep, and unnecessary uphill battle. In the first scenario, the candidate may leave money on the table, while in the second he/she is faced with a fierce negotiation. Of course, it’s important to acknowledge that in a talent-starved industry, if a company wants a shot at landing a top IT executive, being transparent on compensation works both ways.  

3. They know that compensation is much more than salary — and they use it to their advantage.

As of March of 2020, the national unemployment rate is 3.5%; and for the IT workforce, many people believe that the rate is negative. Whether they are actively looking to make a move or entertaining job offers opportunistically, in today’s battle for talent, savvy IT executives are in the driver’s seat. Amid fierce competition, these candidates recognize a tremendous opportunity to emphasize compensation drivers beyond salary — signing bonus, corporate equity, additional vacation, long-term incentive plan (LTIP) inclusion, or other fringe benefits. In addition, the intangibles of the role and corporate culture are often of equal or even greater priorities than financial drivers.  They want to know: Where will I rank among the leadership team and what role will I play in strategic corporate decisions?  Is work-life balance a strong part of the corporate culture, even at the executive-level?  What is the brand reputation of the employer? Does the employer support community or social causes that are important to me? Will they support or facilitate my involvement in industry or professional associations?

Being transparent about salary history and expectations, as well as non-monetary priorities, enables the employer to use more creativity when putting together an offer. And, when there isn’t a lot of room to negotiate on salary, the candidate gains bargaining power in other areas. When appropriate, many executives also leverage recruiters who can help generate creative ideas and communicate the priorities of each party.

To disclose or not to disclose?

When it comes to executive IT positions, where compensation packages are complicated The good news is that while salary disclosure laws make it clear that employers cannot ask or require information about a candidate’s current or past compensation, the laws do not prevent candidates from disclosing this information on their own. More and more, IT executives are seeing the advantages to disclosing salary history, while still staying within the bounds of the law.  In other words, employers and recruiters can’t ask, but candidates can (should) tell. 

Paul Maranville is Managing Partner of Lantern Partners, a premier, retained executive recruiting firm focused on C-suite and senior management positions across multiple business sectors.