For the past few days, Hacker News has been lit up with discussions about the “salary taboo” in white-collar workplaces, including in the software industry. It can be professionally damaging, even leading to termination, to discuss compensation at many workplaces. But why? The conventional wisdom is that this allows companies to “cheat” workers into accepting lower salaries than they would accept if they had full knowledge of their companies’ compensation structures. That’s a small part of it, but it’s not the full story, and the main reason for the institution of secret salary has only a little bit to do with the 5 to 10 percent increase in payroll costs that companies might face if compensation were transparent. That small cost (which would probably be deducted from performance bonuses if companies were called to pay it) is actually trivial in comparison to the real reason companies insist on secret salaries: managerial mystique.

Information is power, and American-style management culture is obsessed with hiding information and demonstrating power. “Don’t ask me why I do what I do; I don’t need to answer to you.” Except when companies are cash-strapped, compensation isn’t really about money or “the budget”. To a much larger extent, it’s about ego. This is doubly true of the compensation table itself, “sensitive information” that must be guarded at all costs, as if it were a sacred and phallic object whose exposure to profane eyes would render every man in the tribe infertile for 14 years. As for the money, managers aren’t especially terrified of the 5 to 10 percent increase in personnel costs that could occur if salaries were made transparent. Rather, they’re scared of the discussions that would ensue. Suddenly, subordinates would feel entitled to argue, more openly, about whether it’s fair for Bob to be paid so much while Alice is paid so little. The workplace would begin to feel like a democracy (zounds!) in which subordinates are entitled to hold opinions on “sensitive” personnel matters, rather than a father-knows-best “benevolent dictatorship” where each person is “taken care of” in isolation. That is the real reason why transparent compensation “cannot be allowed at the present time”.

I do not mean to attribute such motivations to managers as individuals. Most “bosses” are not power-obsessed tribal strongmen, but good people trying to do a difficult job and sometimes taking tips from a (very defective) culture when they’re not sure what the right decision is. Some, like Jason Fried of 37signals, even have the courage to acknowledge openly the brokenness of American management culture. So I don’t want to lead people to suddenly conclude that their otherwise decent bosses are power-hungry jerks only because they insist on secret compensation. It’s not that simple. I do think it’s important, however, to acknowledge that the real reason white-collar management culture, as a systemic whole, insists on keeping compensation secret. It has very little to do with keeping personnel costs low or offering unfair deals (although “lowball” offers are sometimes given). It’s about managerial mystique, and the power that access to “sensitive” information confers.