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Use of internal salary data in personal salary negotiations

direct reports make more than meHoping all senior finance execs can chime in with opinions on this one...

I head finance and so am privy to all salary data within the company.  Recently, I requested a personal salary increase and one of the data points I used to support my request was salaries of others in the company.  Specifically, I noted that two junior employees (one of whom is my direct report) was more highly compensated than me.  The good news is I got a raise.  The bad news is that my CEO feels that it was "unethical" of me to use this data point in my negotiations.  Of course, this was an absolute kick in the gut because I pride myself on my dedication to ethical business practices.  

I'm flying blind here and wondering how the community feels about this situation.  Any quick responses are greatly appreciated.   I've committed to polling my peers and getting back to my CEO on feedback.

Thank you!

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Mr./Ms. Anonymous - It is my opinion you, or any other manager, should be privy to knowing what your staff makes that reports to you. Otherwise how can you justify an increase for them, right? Here is a question for you to think about, was what the company paying you in proportion to what you should be receiving at a comparable firm? Or was the staffer's pay in excess of what reasonable proportion? If you were being unpaid according to market, then I do not see anything incorrect with what you did.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Proformative offers 400+ online business courses with free CPE, many on HR.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

The CFO position is the keeper of all information. There are no secrets, as you know where all the bodies are buried. You are in your position because you understand the value of information. and its use. It is for that reason that you were hired by the CEO.

Your CEO has successfully pulled you away from the question of "Why were you underpaying me?" and now has you focused on "Am I ethical?" If you gathered the information from your competitor would there be an ethics question?

What is confusing to me - did you hire the direct report and set the salary or was that individual acquired by you?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

If you control pay raises for your staff, you obviously know their pay. Your CEO should recognize that and must have known about the anomaly when he hired you; so he should have known one day it would come up.

That said, his reaction may have been to the way he read your approach. For example, could he have sensed that you may have seemed a little angry about your lower pay, or did you come across as professional and fact based, and without leaning too heavily on your junior's pay level?

If your plans with the company (and thus your relationship with the CEO) are long term, it's probably best to find a quiet time to chat with him, find out what he was thinking, and settle this amicably.

Anonymous
(VP Finance) |

Thank you all for your feedback! In response to some of your questions. My CEO and I have a great working relationship, and mutual respect. When we hired my direct report, he and I decided her rate of pay together. At that time, I expressed concern that because she made more than I and because she would also have access to this data, this would put me in a position of questionable authority with her. However, as an overall package (equity plus salary) his argument was that I was more highly compensated, so it could be justified if the discussion between she and I came up. I didn't necessarily agree with that, but just resigned myself to accept it and get on with the job.

The reason I used her salary and another recently hired director-level employee's salary as a data point in my negotiation is two-fold, one that I was recognizing a shift in our salary scale and two because, on a salary basis, I was under compensated against both our internal scale and market.

It's possible that the CEO sensed something more petulant than a mere fact based presentation but I felt I was very professional in my presentation, so I'm not sure that's it. I think it really comes down to the fact that he feels my use of data that no one else in the company has access to (except him) was compromised / unethical.

What I'm hearing from you all though, is that you disagree on that point. I thank you for your consideration!

If anyone else has anything to add, I would appreciate it.

Anonymous
(VP -Finance / Controller) |

I have found that the newest generation of workers (under 30 years old) tend to talk openly with their colleagues about their salaries, bonuses, option packages. It may just be a Silicon Valley thing, but if it is more wide spread, you have much more room to bring up internal "data points". Additionally with services like Glassdoor.com you can get a pretty good idea what your pay is relative to the market.

I have run into the same situation as you and agree with Regis's remarks about the focus shifting from compensation to ethics. It is no more or less ethical for the CEO to knowingly underpay you than for you to use internal pay information to increase your pay. You should always frame the debate around your contribution, accomplishments, goal achievement and what your position is worth to the company. Pointing out salary compression and inequitable pay situations is also part of your job and you should remind the CEO of that. You should do that for anyone you see in that situation and remind him of that. The fact that it happened to be you in this situation should not alter the conversation.

I empathize.. it is not an easy position to be put in, but I think you would be compromising your ethics if you DIDN'T speak up. Also, you always have to look out for yourself if you know the CEO isn't going to...

Anonymous
(Controller) |

I was in a similar situation (director level for silicon valley startup). When the time came to address the matter with the CFO, I started my conversation with the notion that I didn't know the company was the type that paid "high" salary rates (i.e. some companies pay low and some high). The CFO clearly understood and I got a >20% raise. As an added bonus, I now focus my career search on those companies that pay on the higher side.

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

Any salary discussion should be framed around contributions, roles, and benchmarks vs. market rates.

That being said, I'm struggling with the notion that any reasonable person would expect to pay a professional less than his or her direct reports. This might happen via bonus awards and such, but base pay should be commensurate with experience/role. How is a subordinate supposed to take you seriously if they make more than you?

I would ask myself if this "subordinate" is intended to remain such for very long...

Charlie Hoffmann-Smith
Title: AGM
Company: Comfort Inn
(AGM, Comfort Inn) |

Well i believe that your boss was unethical in the first place paying those that are subordinates to you more. You have the title for a reason if your boss values you as an employee he or she would pay you more than those that report to you.

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