The trouble with secrets: pay secrecy, satisfaction and climate

PurposeResearch addressing the impact of tacit and explicit pay secrecy policies on organizational climates is fairly limited. While researchers desire to explain the impact of such policies on individuals' pay satisfaction, a direct effect has not been supported. This study seeks to better explain how these policies are related to ethical climates and pay satisfaction.Design/methodology/approachThis study draws on ethical climate theory to show the influence of ethical climate types on job satisfaction and a moderating effect of explicit and tacit pay secrecy policies on this relationship. This is accomplished through designing this study by using existing scales from the literature in a survey methodology. A pilot study of 246 undergraduate students was used to validate the measures. Then, a sample of 217 adults was obtained to test the proposed relationships. Linear regression is employed to analyze the data and to test the existence of direct and moderating effects.FindingsThe five empirically tested ethical climates each have a direct effect on pay satisfaction. Explicit pay secrecy policies has a positive moderating effect on the relationship between rules, law and code ethical climates, and pay satisfaction. Tacit pay secrecy policies moderate the relationship between caring, rules, law and code, and independence ethical climates and pay satisfaction.Research limitations/implicationsThe findings strengthen the literature by demonstrating a stronger relationship between ethical climates and pay satisfaction. While some of the moderating effects were significant, others were not. This was surprising, but present avenues to further test ethical climate theory and the impact of pay secrecy policies.Practical implicationsThis study presents practical implications for managers. Understanding how these policies may be viewed differently, depending on the type of climate that is experienced within an organization may help managers evaluate using them. Trying to protect employees or the organization itself by enacting these polices may backfire and create additional problems. Managers may want to evaluate the manner that they communicate these polices through formal or informal means, depending on the type of climate experienced within the workplace.Originality/valueThis study is the first to examine the influence of explicit and tacit pay secrecy policies on the relationship between ethical climates and employees' satisfaction with pay. It leads to a number of directions for further research that may continue to build upon this study in order to further advance scholarly understanding of the importance of ethical climates and pay secrecy policies.

The Joint Effects of Supervisor Pay Transparency and Vertical Pay Dispersion on Reporting Honesty

ABSTRACT We experimentally investigate how supervisor pay transparency interacts with vertical pay dispersion to affect subordinates' reporting honesty in a budgeting setting. We find that the effect of supervisor pay transparency relative to pay secrecy becomes more negative as vertical pay dispersion becomes higher. Our findings suggest that while supervisor pay transparency complements an egalitarian pay structure by increasing reporting honesty, it does not fare along with high vertical pay dispersion as the combination of the two appears to decrease reporting honesty, even when such high dispersion can be justified. Further investigation suggests that our result is not driven by the feeling of unfairness toward high supervisor pay, but by a benchmarking effect (i.e., subordinates use supervisor pay as a pay standard and try to find ways to earn a similar amount).