Doreen E. Lilienfeld is a partner and Matthew Behrens is an associate at Shearman & Sterling LLP. This post is based on their Shearman memorandum.
From Wall Street to the soccer pitch, public interest in addressing the gender pay gap is greater than ever. While the press covers the U.S. Women’s World Cup team’s struggles to earn equal pay for equal (or, rather, superior) work, ESG-focused investors are demanding more granular disclosure of companies’ efforts to close the gender pay gap. Companies that fail to address gender pay inequality may not only see reputational damage, but may find themselves at a competitive disadvantage as talent migrates to those companies that prioritize fair pay and opportunities for career advancement. Companies that do not keep up face the risk of potential legal action, as well as shareholder and consumer backlash.
This post analyzes recent developments in the gender pay gap debate and offers practical advice to companies confronting deficiencies in this area.
The Gender Pay Gap as an Opportunity Gap
Here are the facts: In 2019, the median pay for women is 21% less than the median pay for men or, put another way, women earn only 79 cents for every dollar earned by a man. [1] When factoring in race, the gap grows even larger. For each dollar earned by a white man, a white woman earns 80 cents while American Indian, Alaska Native, black and Hispanic women earn just 74 cents. By its nature, a “median pay” comparison is derived without regard to job type, seniority, location, experience or other similar factors. When applying an “equal pay” measure that controls for the same position and qualifications, the gap shrinks substantially — such that white women earn 98 cents for every dollar earned by a white man while non-majority women with similar educational and other qualifications earn 97 cents for every dollar earned by a white man. [2]
