Banning Salary Negotiations – Is Ellen Pao Right?

Banning Salary Negotiations to Curb Gender & Race Pay Disparities – Is Ellen Pao Right?

“Men negotiate harder than women, and sometimes women get penalized when they do negotiate.”

– Ellen Pao, CEO of Reddit

This past March and April, many of us closely watched Ellen Pao’s high-profile gender discrimination lawsuit play out in the courts. Ellen Pao (now Interim CEO of Reddit, an entertainment, social networking, and news website) sued Silicon Valley venture capital firm Kleiner Perkins Caufiled & Byers (KPCB). The related national media attention showcased the lack of diversity in the tech industry.

Sparking a lot of discussion, it exposed this dirty little secret that has been festering for decades. The news coverage forced us to rip off the band-aid from what some deem a longstanding culture of discrimination that hinders the advancement of women and people of color in Silicon Valley. It also made us evaluate parity in pay and promotions all the way to the top.

Ellen Pao’s Lawsuit & the “Pao Effect”

In May 2012, Pao filed a gender discrimination case claiming $16 million in lost wages and $144 million in punitive damages. On March 27, 2015, she lost her case. A California jury ruled that Pao’s gender was not a motivating factor for her termination from the firm or for her failure to be promoted to general partner, nor was her firing an act of retaliation against her. On June 1, 2015, Pao filed a notice of appeal, and both sides are currently seeking reimbursements for legal costs.

One byproduct of this case has been the potential increase in more women speaking up about biases and discrimination in the workplace. Recently, several employment lawyers stated that the number of women coming forward with gender discrimination complaints had increased – which has been referred to as the “Pao Effect.”

Silicon Valley’s Next Steps – An Unclear Future

Now that we are talking more and more about diversity and equality, what are we going to do about it? What initiatives will Silicon Valley and the tech industry implement to promote diversity and parity in the workplace? Are the industry’s recent responses to this discussion going to take us in the right direction? Will anything change with companies like Google, Intel, and Apple recently earmarking funds for diversity?

Or will we just get a lot of lip service? Will we continue to see outdated, typical policies replicating the ineffective approaches of other companies as people wait for this to blow over until the next major lawsuit?

Time will reveal these answers.

Reddit’s New No-Negotiation Pay Policy

In response to her own experience with KPCB, in April 2015 Ellen Pao made the bold move of freezing wage negotiations at Reddit. Many of us have heard the statistics about salary gaps for women and minorities. The data shows there is much room for improvement to achieve pay parity across racial and gender lines.

Wage Gap By Gender

Source: Bureau of Labor Statistics (2014)

Research from the Bureau of Labor Statistics shows that for every dollar a man earns, a woman earns on average only 82-cents. There is also a wage gap across races with some groups earning less than others.

Wage Gap By Race

Source: Bureau of Labor Statistics (2015)

To help address wage inequality, Pao believes this no-negotiation policy is the solution and will better position women.

Is this really the answer? Or is the better approach to empower women and diverse talent to become better negotiators to help eliminate pay gaps?

What people need to equalize pay is better access to information and improved skills at the bargaining table.

Freezing Salary Negotiations = A Power Shift

In a perfect world, there would be wage transparency where employers reveal how much people are paid (i.e., an open and not closed compensation model). Companies would also price the job based on a series of objective market benchmarks – thus, pricing the job rather than our current model that subjectively values individuals. Unfortunately, we do not live in this world and need to deal with today’s realities.

Arguably, creating lock-step and no-negotiation compensation models could shift more leverage and bargaining power towards employers. Removing the primary tool employees have to level the playing field with employers may disproportionately hurt women and minorities in the end, which is the opposite of what Pao and Reddit hope to achieve.

Taking the no-negotiation approach assumes employers will make wage offers uniformly, fairly, and with integrity. It places a lot of faith in companies that have a financial interest in keeping overhead costs low and suppressing wages. Reddit’s approach forces us to trust that women and minorities will be offered the same compensation packages as their male and non-white counterparts. With take-it-or-leave-it job offers, there is no room to demand your worth and move closer to your fair market value.

Final Thought – Be Proactive!

We should avoid opening the door for companies to implement policies that diminish wage packages and perks for their workforce – especially women and people of color. Instead of eliminating our opportunity to advocate for better pay, we should support the negotiation process.

Equally important, employees should be proactive and take charge of their careers and future. One way to do this is to hone your negotiation skills. Becoming a better negotiator and influencer helps you get what you want and earn more money.

Just remember – no one is going to better position you than you can yourself. So start negotiating your future…today!


The Azara Group (TAG) is a consulting firm that promotes the development of leaders in an increasingly competitive and diverse marketplace – providing strategy consulting services and leadership training services to advance professional and life success. TAG leverages expertise in career strategy, diversity, negotiation skills, and business acumen to provide strategic advice and consulting services to help people and organizations get what they want, achieve their goals, and advance their business and career objectives. TAG also helps companies better attract, retain, and promote diverse talent, and develop robust diversity platforms and strategies to create a more inclusive workplace.

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