Is There a Gender Gap in CEO Compensation?

Vishal Gupta is associate professor of Management; Sandra Mortal is associate professor of Economics, Finance, & Legal Studies; and Xiaohu Guo is a PhD candidate at the University of Alabama Culverhouse College of Commerce. This post is based on their recent article, forthcoming in Strategic Management Journal.

Our research examines whether there is a gender pay gap in CEO compensation. Issues surrounding the gender pay gap have attracted considerable academic and media attention over the past few decades (Blau & Kahn, 2017). The growing presence of women in CEO roles has spurred interest in understanding how gender may affect the treatment of those who, against significant odds, manage to reach the top of the organizational hierarchy. Compensation captures the monetary value an organization subscribes to the contributions and importance of its individual employees, including the chief executive. The remuneration given to a manager for his or her job has “many consequences for that manager, the top management team, the organization, and stakeholders in the organization”, so that executive compensation is of compelling interest to researchers and practitioners (Finkelstein, Hambrick, & Cannella, 2009). It is therefore not surprising that a large and vibrant body of research exists on the topic of CEO compensation, though much less consideration has been given to the possible influence of gender on CEO compensation (perhaps, because of the relative scarcity of women CEOs in the past).

Scholars theorize, and evidence points to, three distinct possibilities for how gender may affect CEO compensation. First, because researchers have consistently found that women tend to be paid less than men in the general workforce (Joshi, Son, and Roh, 2015) and in managerial or executive roles (Bertrand and Hallock, 2001), it seems reasonable to expect that women CEOs may also not be immune to the compensation disadvantages associated with their gender. From this perspective, women CEOs will receive less compensation than their male counterparts. Accordingly, Lam, McGuiness, and Vieito (2013) found that male CEOs were paid more than female CEOs in China. Second, because of the relatively stronger demand for, and lower supply of, high-potential women managers compared to male managers (Leslie, Manchester, and Dahm, 2017), there will be a ‘female premium’ in compensation for women in executive positions (Gayle, Golan, and Miller, 2012). From this perspective, women CEOs will receive greater compensation than their male counterparts. Indeed, Hill, Upadhay, and Beekun (2015) report that female CEOs receive 6% higher compensation than male CEOs. Finally, given that the CEO occupies the most visible and salient position in the firm, it attracts the most attention from stakeholders, including the general public. In such a situation, it is possible that there is no gender bias in CEO compensation. Bugeja, Matolcsy, and Spiropoulos (2012), for example, found no significant difference between male and female CEO compensation using a matched-sample of CEOs.

To examine if there is (or not) a gender pay gap at the CEO level, we draw a sample of US-based large public firms by merging four different datasets: ExecuComp for compensation data, RiskMetrics for data on board characteristics, Compustat for accounting data and equity market value, and CRSP for return information. Our sample contains 19,170 firm year observations from 1996 to 2014 covering 2,282 unique firms with 469 firm-year female observations and 105 unique female-CEO firms. We controlled for several possible confounding factors, including (but not limited to), firm size, firm performance, equity returns, firm risk, CEO tenure, CEO duality, board size, and board independence. Because CEO compensation has increased over time and so has the number of women CEOs, we also include time-fixed effects in our model. Our results reveal that there is no significant difference between male and female CEO compensation, so that there is no evidence for a gender pay gap at the CEO level in our data. We conduct several additional analyses, such as examining the pay gap in different time periods (e.g., 1996-2005, 2006-2014) and using alternative econometric techniques and find no meaningful change in results.

Our findings advance the existing academic and popular discourse on gender pay gap. It is believed that the gender pay gap is “both persistent and universal” so that “earnings statistics for 150 countries worldwide show that, without exception, women’s earnings lag behind those of men” (Lips, 2013: 169). Popular press has echoed similar concerns, such as when Bloomberg BusinessWeek recently noted that an “essential, frustrating truth about the gender pay gap” is that “you can never make it go away” (Goodman, 2018: 22). Based on our results, we believe that there is at least one prominent organizational position where gender has no influence on how much the person is paid, namely the CEO. Our research also casts doubt on the veracity of provocative claims such as “female CEOs of the largest public companies are actually out-earning men” (Fortune 2016, May 10) or that “though outnumbered, female CEOs earn more than male chiefs” (WSJ 2017, May 31). The truth seems to be that, once relevant confounding factors are accounted for, male and female CEOs earn similar compensation, which is what standard economic theory would suggest and most people would like to see happen in society.

We hope the results of our research will raise awareness that CEO gender has no effect on the compensation s/he receives, which is a welcome finding in today’s zeitgeist of gender equality. Of course, whether the gender pay gap exists for other non-CEO top management positions (such as the Chief Financial Officer or the Chief Operating Officer) cannot be answered based on our research and will need to be empirically examined in future research.

The complete paper is available for download here.

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