Even After Microsoft CEO's Gaffe, Many Tech Execs Won't Want "Equal" Pay

On Thursday, Microsoft CEO Satya Nadella said something that shocked and enraged a lot of people. At the Grace Hopper Celebration of Women in Computing, Harvey Mudd College’s Maria Klawe asked him how women should go about asking for a raise. His response:

"It’s not really about asking for a raise, but knowing and having faith that the system will give you the right raise. ... That might be one of the initial 'super powers,' that quite frankly, women who don’t ask for a raise have."

Hours later, Nadella walked those comments back in an email to Microsoft employees that he also posted on Microsoft's website. The key passage:

"Toward the end of the interview, Maria asked me what advice I would offer women who are not comfortable asking for pay raises. I answered that question completely wrong. Without a doubt I wholeheartedly support programs at Microsoft and in the industry that bring more women into technology and close the pay gap. I believe men and women should get equal pay for equal work. And when it comes to career advice on getting a raise when you think it’s deserved, Maria’s advice was the right advice. If you think you deserve a raise, you should just ask."

Can Meritocracies Be Biased?

Let me first say I don't have any special insight into Nadella's thought process behind his statements. But after working in Silicon Valley for 14 years, I do have a sense of the culture of today's tech companies. And you know what? It's the sort of culture where going into the boss's office and asking for a raise is not likely to work very well, even if you really think you deserve it.

The reason is that today's tech institutions tend to believe they're operating as color-blind, gender-blind, market-based meritocracies. And if they are correct, then Nadella's first statement doesn't need walking back or clarification. If you deserve a raise, you will get one, because the market will make it so.

The Netflix Culture Deck

I bet you'd like to know how. Exhibit A is this slide deck about corporate culture from Netflix, a hot Silicon Valley company whose practices are widely admired. (Netflix founder and CEO Reed Hastings was on the Microsoft board of directors until last year.) Netflix's human resources approach could be described as Libertarian. We're not a family, Netflix says; we're more like a team. We seek to retain only the best employees – the merely adequate get a generous severance package. And we pay top-of-market salaries – but there's a catch:

Each employee is his or her own market. In other words, we'll pay you slightly better than what we think you could get elsewhere. The goal isn't equal pay, it's the best pay for that person. To quote the slide deck from slides 99 and 102:

"Lots of people have the title 'Major League Pitcher' but they are not all equally effective. ... Similarly, all people with the title 'Senior Marketing Manager' or 'Director of Engineering' are not equally effective."

"Some people will move up in [compensation] very quickly because their value in the marketplace is moving up quickly, driven by increasing skills and/or great demand for their area. ... Some people will stay flat because their value in the market has done that. ..."

How do bosses pinpoint what your value is? In many cases, the answer is probably that they aren't sure, unless you walk into the office holding an offer from another company. That's how the market-based meritocracy works best.

Except when it doesn't.

What If It's Flawed?

We now know that Steve Jobs was the driving force behind a multi-company arrangement that intimidated competitors into steering clear of recruiting Apple's prized engineers. Jan Koum, co-founder of Whatsapp, which Facebook bought for a final price of more than $20 billion, got rejected for a job at ... Facebook, before he started his company. And the murmurs that rose from the room when Nadella made his comments at the Grace Hopper event suggest that some of the women in attendance had their own experiences where the market-based meritocracy didn't operate at peak efficiency.

So what that suggests to me is that not a lot will change in the short term as a result of the fallout from Nadella's comments. Netflix, and the many companies who admire its culture, aren't going to adjust their pay practices on a dime. Google and Facebook aren't going to stop giving away millions of dollars in equity to engineers whom rivals are trying to poach – even if a less-widely-known but equally talented engineer a couple of seats away is missing out on the payday.

In the aftermath of this gaffe, there will be calls for Nadella to use Microsoft's resources to close the pay gap. But for that to happen, he'd have to first abandon the idea that tech runs as a fair, market-based meritocracy. That's an idea the tech industry at large won't abandon without a fight.

Photo: Kevin Moloney/Fortune Brainstorm TECH/Flickr