Dissecting C-Suite Gender Pay Disparity

Lyla Qureshi is a Research Analyst at Equilar. This post is based on an Equilar memorandum by Ms. Qureshi.

April 10th marked Equal Pay Day 2018 in the United States. This particular date was chosen to highlight the occasion because it represents the amount of time—approximately 100 days into 2018—women must work to achieve the same pay that men earned in 2017. To further shed light on this topic, Equilar examined the gender pay equity ratio of specific executive levels. To understand the gender pay equity ratio as it stands today, Equilar calculated the ratio by analyzing the total compensation (base salary paid, incentive awards valued at target, grant date fair value of equity awards) received by male and female executives, particularly those who occupy the positions of chief executive officer, chief financial officer, human resources executive and general counsel at companies classified in the Russell 3000 market index over the last three years.

In 2015, the median male CEO earned approximately 1% more than the median female CEO, while in 2016 the gap reversed with female CEOs earning approximately 3% more than their male counterparts. The most recent year in the study saw the gap increase further in favor of women, with female chief executives making 6.3% more for the same-level job performed by the median male CEO. While these statistics may be positive indicators for those striving for gender pay equity, they should be viewed with caution due to the vast difference in the sample size between female and male CEOs. In 2017 there were 135 female CEOs, leading to a more volatile median number in terms of total compensation for females. In light of this uneven sample population of male and female CEOs, the pay differentials between three other executive positions, namely CFOs, HR executives and GCs were analyzed.

For the role of CFO, men earned consistently more than women from 2015 through 2017, with their pay differential resting at 11.2% in 2017. Human resources executive was the position that witnessed the greatest change in gender pay ratio in the past three years, with the male-to-female pay ratio rising by 28.1 percentage points in favor of men. Between 2015 and 2017, female executives who served as general counsels made less money than men who performed the same job, with the difference rising from 4.3% in 2016 to 7.0% in 2017. Thus, during the timeline of this study, apart from CEOs, all other executives saw an increase in gender pay disparity. However, merely observing the overall numbers does not paint the entire picture. To gain a deeper insight into gender pay equity, Equilar examined the differences in pay with respect to sector. Any ratio of more than 1.0 indicates that the median male compensation was higher than the median female compensation at a given position.

Breaking down CEO pay by sectors for 2017 tells us that women tend to earn more than men in the consumer goods, financial, services, technology and utilities industries. On the flipside, the sector with the greatest disparity in terms of CFO pay is financial, while for HR executives, the largest gap can be found in the technology sector. In fact, the table above illustrates that consumer goods was the only sector in which women received more money than men in all four executive positions analyzed in this study. Conversely, men earned exceptionally more than women across all executive positions in the healthcare sector.

For the most part, the findings of this study are not entirely surprising. The New York TimesWall Street Journal and CNBC have all published stories recently about the implications of the gender pay gap, or lack thereof, across the C-suite at public companies. While the gender pay gap as examined in this article, in particular the results found at the CEO level, may not necessarily be earth-shattering, the rise in overall NEO gender pay disparity between the years of 2016 to 2017 stands out. This widening of the gap goes hand in hand with trends recorded in a report issued by the World Economic Forum which found that gender parity has shifted in reverse for the first time since 2006. Additionally, another finding of note involved the persistent gender pay equity gap in the healthcare sector, between both the median male and female at all executive positions in the study. One factor that might help explain this difference is the lack of space available for women to negotiate their salaries.

“Few women make it to those jobs where they’re making hundreds of millions of dollars, so they’re really seen as the exception, rather than the rule, and so that impacts their ability to negotiate,” Anna Beninger, Senior Director of Research at Catalyst, an organization performing research on women and the workplace, told CNN Money. “Moreover, when women do tend to negotiate, they are treated differently than men.” Beninger goes on to say that because women are not expected to negotiate as strongly as men, when they do so they are perceived as aggressive and oftentimes that yields a negative result. According to recent research, although there are several factors that contribute to the pay disparity between genders, discrimination against women continues to be a problem. With the increased emphasis on equity and fair play in workplace, one hopes to see a shift towards more equitable distribution of compensation between male and female executives in the near future, or at the very least an increased effort to spread the message of gender pay equality.

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