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Hit The Ground Running

Why Tech Leaders Are Mixed On Reddit's End To Salary Negotiations

Ellen Pao announced that she won't "reward people who are better negotiators with more compensation." What do her peers think of the move?

[Photo: Flickr user Antonio Zugaldia]

After weeks of battling it out with venture-capital firm Kleiner Perkins Caufield & Byers in the courtroom, Ellen Pao is continuing her fight against gender discrimination with a new initiative: eliminating salary negotiations in the hiring process at Reddit, where she serves as interim CEO.

Last week, Pao told the Wall Street Journal that Reddit would allow candidates to "swap a little bit of [their] cash salary for equity" if that’s what they want, but, otherwise, there will be no negotiations during hiring because Reddit will not "reward people who are better negotiators with more compensation." Exactly how Reddit will come up with an offer they think is fair is still unknown.

The Case Against Pay Negotiations

In general, the women Fast Company spoke to in the tech world applaud Pao’s efforts.

Joelle Emerson, who heads up Paradigm, a strategy firm that works with tech companies to promote diversity, calls Pao’s decision a "great example of doing something new and creative" to address a persistent barrier so paramount in tech.

"Women are as good as or better negotiators than men, [but] we don’t negotiate as effectively on our own because when we do, we’re penalized for it and there’s a social cost to negotiating," says Emerson, a former sexual harassment lawyer. "By taking that out of the process, this is a good step toward establishing a level playing field."

According to Noreen A. Farrell, executive director at Equal Rights Advocates, a women’s rights advocacy organization based in San Francisco, testing different solutions to address gender and racial disparities is what tech companies need to do "if they are serious about diversity and fairness."

"In reality, negotiation as it exists now in most workplaces is a misnomer because it implies that both sides have access to information needed for a strong exchange of proposals," says Farrell. "That is not the case. Too often, applicants or employees do not know what others are being paid, so they are at a disadvantage as they try to advocate for themselves. I think ending that kind of one-side negotiation is important and I applaud Ellen Pao’s willingness to test an out-of-the-box solution to a real problem impacting women and people of color in the workplace."

Examining whether negotiations actually improve or hurt gender disparity has been happening for years. A UC Berkeley study found women negotiators easier to mislead compared to their male counterparts. Another study found women are more intimidated than men while negotiating and therefore, don’t advocate for themselves as strongly. A paper from Workplace Gender Equality Agency says failure to negotiate is a big reason why women end up on the lower end of the pay scale.

Case in point is Sheryl Marshall, investor and founder of Boston Women’s Venture Capital Summit, who found out she was getting paid $50,000 less than her male colleague "in the same circumstance" after years of working at the company.

"I was so ashamed at myself," she says. "My inclination is that there’s a whole generation of women, younger women probably in the tech community, who don’t have a clue about what they should be paid and unfortunately the playing field has not been leveled yet so I say, good for [Pao]."

But not everyone believes negotiations have to broaden the gender divide.

Shirli Kopelman, a professor of management and organizations at the University of Michigan’s Ross School of Business, says that while Pao’s intentions are "noble," it’s important to know that negotiating is about "creating value and identifying opportunities together that are win-win agreements." Without those negotiating circumstances, opportunities don't exist as rapidly.

"I think it’s important to keep in mind that negotiating is an expertise that anyone can learn," she says.

Will It Level The Playing Field?

The consensus is that there’s a lot more to it than ending back and forth bargaining powers in a controlled environment.

Vaibhav Mallya, founder of OfferLetter.io, which provides engineers and tech workers with negotiating and career advice, has mixed feelings about Pao’s new policy. If Reddit wants to eliminate unfair pay practices, Mallya says they need transparency, meaning every new hire needs to be able to see what others in the company are making.

"If I was a candidate and I get an offer from Twitter, Facebook, and now Reddit, every single one of these places is going to say, ‘I’m making a fair offer,’ he says. "If Reddit makes a single offer, it will be what they feel is fair, but because there’s no transparency, there’s no broadcasting of what actually is going on," he says. "I can’t actually trust that. What does fair mean in that context?"

"There’s a lot that needs to be done before general inequity in the landscape can be resolved," he continues.

And what if Reddit finds that pay disparity already exists in the candidate interviewed? They will have to go a "step further" in their hiring process and evaluate whether seemingly objective criteria, like past salary, should have an effect on the offer, says Farrell.

"If objective criteria closely tied to job qualifications and job performance cannot explain pay differentials between some men and women doing the same job, Reddit should equalize salaries of those employees, through pay or other benefits," she says.

Emerson agrees with this sentiment: "Make sure that in the way that you’re setting salary and pay, you’re not perpetuating disparities from past companies. One thing we see a lot is that pay is set in your last company and even if this current company has the best intentions, if you were being treated unfairly at your last company, that’s just going to follow you throughout your career."

Will Pao’s initiative work? Will ending negotiations help eliminate another subtle form of sexism? The jury is still out on this case.

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