The concept of open data—that is the notion that information and intellectual property should be freely available without copyright or patent restrictions—didn’t exactly start with the beginning of the Internet.
But the overwhelming quantity of information generated by the Internet coupled with its ability to easily access, transmit and share data makes it a key concern for businesses and government.
Open data proponents argue it is the foundation of a new digital democracy. The OD500 Global Network, for example, is an international consortium that enables participating organizations to share open data and better understand economic and social trends within and across nations.
Similarly, open-source software is viewed as the best way to collaboratively develop and improve technology without corporate restrictions on intellectual property that prevent sharing patented processes.
On the other side is Apple, which has built a considerable ecosystem that is not only highly successful but highly defensive about protecting the data underlying its technologies. The music industry is also reeling from the effects of file sharing, which has led to the decline of CD sales and digital downloads. If no one feels they should pay for what someone has created, how can people who create things afford to support themselves?
For businesses, open data has implications beyond what they can or should charge for their products and services, as well as what information they can rightfully protect from others to maintain a competitive advantage. Data transparency may also force businesses to reveal information about things they’d rather not make public, or truly feel should not be public knowledge because it may be misused.
Public access to companies’ private data
The SEC just approved a requirement that public companies must publish the ratio of a CEO salary to that of employees. The rule offers vital information, according to proponents, that shareholders and regulators can use to better assess corporate performance and who in the company is truly benefitting from that performance.
Deal Book points out that shareholders could compare the ratio between competing companies. So, if the gap between a chief executive and a rank-and-file employee is considerably different between, say, PepsiCo and Coca-Cola, shareholders could press management to explain what justifies the difference and adjust it if needed.
Sociologists and politicians maintain the data will reveal the growing income equality gap in this country, which could be used to promote changes in social programs and corporate regulation. It could conceivably result in narrowing the income gap between CEOs and employees. How you feel about may depend on your political philosophy (the SEC’s two Republican commissioners voted against the rule, the SEC’s Democrat commissioners passed it) and/or your end of the pay scale.
In addition, there are extra expenses in calculating the ratio, as well as questions about how certain, ill-defined guidelines on ratio calculations may skew inaccurate results. The position of the Center on Executive Compensation, which represents large employers, is that the pay ratio “will only serve to mislead and potentially harm investors and the public,” because it leads to inapplicable comparisons among companies that will be used to advance narrow social agendas that do not reflect the interests of most shareholders.
Exposing the gender income gap
A similar discussion relates to closing the gap between male and female compensation. In Britain, recent legislation requires firms with more than 250 employees to publish the average pay of male and female employees, reports the BBC.
The criticism of such a requirement is the same as for the CEO-employee ratio—it will be expensive to implement and potentially misleading. Joanne Lipman argues in The New York Times, however, that it is a first step to tackling income inequality. Firms that released data revealing pay disparity were quick to close the gap. Whether because they were publicly embarrassed or because they were legitimately concerned about the issue is beside the point. Disclosure of the data led to correcting the issue.
Such transparency would also reveal any significant differences in pay in comparison with minorities and other disadvantaged groups. Lipman argues that companies invest substantially in training people to look for unconscious bias and unintentional discrimination. Publishing such data is really a more cost-effective way to correct the problem. The political reality, she concedes, is that such proposed data transparency will be resisted in the same way the CEO-employee pay ratio has.
For a small business, the costs of being open about such issues are minimal compared to those of a large corporation. The benefit to being open is that it positions you as a progressive company that aims to treat everyone equitably. That’s bound to attract top-level talent, at both senior and entry levels, as well as a diversity of perspectives that are essential for long-term business success.