Netflix yanks back senior managers’ ability to see their coworkers’ pay

The streaming giant’s director-level executives—senior managers who are neither C-suite execs nor vice presidents—have long had the ability to see their colleagues’ salaries. Now they’re in the same boat as the rest of us, the Wall Street Journal reported Wednesday. 

According to the Journal’ssources at Netflix, the walkback stemmed from the vast expansion of director-level hires in recent years, some of whom demanded explanations for their pay discrepancies. Despite rounds of layoffs, Netflix employed 11,300 full-time workers at the end of 2021, representing a nearly 60% headcount growth from 2018.

The move comes as an embattled Netflix attempts to tighten its belt after hemorrhaging subscribers in the first half of 2022. The revoke of access, instituted late last year, is a contradictory move by a company that, as the Journal puts it, has heretofore “offered a rare degree of transparency to its workforce.” That was mainly thanks to its co-CEO Reed Hastings, who has said transparency is vital to a healthy company culture. 

“Transparency has become [our employees’] biggest symbol of how much we trust them to act responsibly,” Hastings wrote in his 2020 book, No Rules Rules. Netflix has historically relied on a laissez-faire approach to leadership and management, he wrote, which necessitated “increasing organizational transparency and eliminating company secrets.”

There’s also the fact that Netflix, like many Fortune 500 companies, must comply with new salary transparency requirements in places like Washington, Colorado, California, and New York City. Like many companies, they’ve been taking a backhanded approach, putting enormously wide bands on their job postings. One software engineer job provided a salary range of $90,000 to $900,000.

The push and pull of salary transparency

Transparency laws going into effect across the country have breathed new life into the debate about their efficacy. Data suggests the answer is simple. A vast research initiative from University of Utah’s David Eccles School of Business found conclusively that knowing what your coworkers make “substantially reduces the gender pay gap, as well as other forms of pay inequity.” 

When institutions increased wage transparency in a centralized way like Netflix did, the Utah researchers saw the gender pay gap close by 50%, and wage adjustment policies “substantially” changed—namely by granting bigger pay increases to historically underpaid groups.

Sharing salaries also has the potential to spur collective action. In a study from the Journal of Economic Behavior & Organization, James Flynn, an economics Ph.D. candidate at the University of Colorado, found that workers respond to perceived pay unfairness not by withholding effort—or, to use the term du jour, quiet quitting—but rather by shifting their effort to better align with what pays more. 

Companies that pay their workers low wages, Flynn writes in his conclusion, “have a strong incentive to keep salary information secret, while higher-paying firms could benefit from policies designed to increase salary transparency.” 

The kind of “transparency shock” that comes with seeing what your coworkers are paying shouldn’t make anyone nervous—except bosses who know they’re earning inexcusably more than their workers. That may well be the case at Netflix, where Hastings’ total compensation in 2021 exceeded $34 million. (For co-CEO Ted Sarandos, that figure jumped to $40 million.)

Despite removing the pay transparency perk, Netflix employees still enjoy more high-level insights than many public companies of similar size, including access to “strategic documents,” the Journal wrote. Netflix didn’t respond to Fortune’s request for comment on what, exactly, those are.