In my new book, The Responsibility Revolution, I look at companies that conduct internal business with transparency. Seventh Generation is one of those companies, but a recent experience here made me realize that it is always easier to stand at the doorstep of someone else’s challenges, peering in and offering advice, than it is to deal with your own.

A few weeks ago at our quarterly Seventh Generation community meeting, we took on a subject that often ends up a trip into dangerous territory, one where it’s hard to feel good about the outcome no matter how good you’re doing: changes in compensation programs. In discussing some changes we need to make for 2010, we took a chance and significantly increased the level of transparency around “who gets what.” For the first time, up on a gigantic screen were salary bands for the entire community. Now we have always had a salary ration of 14 to 1, where the highest paid employee (historically me) never was paid a salary greater than 14 times what the lowest paid person earned, but we never shared the salary ranges for other positions in the company. We also shared a new bonus structure, one that will increase performance-based bonus percentages for all. Good news, we thought before the meeting.

Well, as we say around here, “Not so much.”

The effect of seeing a big chart showing both ends of the salary spectrum was upsetting to our community members who earn at the lower end of the range. And the spread between a 10% bonus on a $30,000 salary vs. a 35% bonus on a $150,000 salary left some struggling to define what is fair and equitable when it comes to salaries.

Now, lower wage earners at Seventh Generation are better paid than their counterparts at 90 out of 100 companies. And if you include our benefits and the value of stock options, we probably compensate people at the lower end of the salary range better than 99 out of 100 other companies. By comparison, for those at the top of the food chain, we struggle to do better than 50 out of 100 comparable companies. But does that mean it’s equitable?

We left the meeting with some tough questions lingering in the air. “How do you distribute the increased value created by the business in a fair way between employees and investors? How much money should anyone be able to earn? What is an equitable range of compensation between the lowest and highest paid employees? Is the 14 to 1 salary “cap” the right range?” How do we value that Seventh Generation’s salaries are higher for those at the lower end of the pay spectrum than they are at 90 out of 100 companies? And do we do enough to make our employees aware of just how special a place Seventh Generation is from a salary and benefits standpoint?

We have often discussed with our community the need to be competitive in our compensation in order to attract the best talent. We need the best and brightest in order to compete with much larger companies, and even though we try hard with our compensation plans, most of our senior executives could still make more money working somewhere else. (Of course, many of our employees at all pay levels are drawn to us because we are a sustainable business.) But clearly, there is a disconnect between our corporate strategy and how it feels to those on the lower side of the pay bands. Our management team left the meeting feeling a little dispirited. I circulated a note to them the next day:

“Remarkably good from my point of view. Increasing transparency on compensation issues, people who ordinarily wouldn’t speak discussing very difficult issues, the community able to understand some very complex topics. This conversation is in many respects a unique and very valuable thing. Your leadership was perfect. While it would be nice to feel like our symphony was universally appreciated by the audience, the issues that we took on are part of a journey that few companies rarely take on. We are working out many of the unresolved issues of our society inside our community. While it’s uncomfortable at times, how could it be any other way? Even those who were critical today will grow to appreciate the special opportunity that this community provides. Of this I have no doubt.”

This does not mean I believe we have the answers and are doing all the right things. All it means is that we’re on a journey. That journey has its ups and downs. Sometimes we leap ahead and sometimes we fall back. But the journey is taking place out in the open. I want all employees in the company to feel that if they don’t like where we’re headed, they can suggest another route. And we will listen.

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