Companies that find creative ways to ease the financial pain of equalizing pay may be accused of trying to game the system. (Photo: Shutterstock)
The issue of a gender pay gap among American workers is among the hottest topics in the workplace today, but addressing the problem in an equitable way remains problematic.
Several recent studies underline how companies are struggling to address this problem effectively and fairly. One study examined the (slow) progress women have made in representation in corporate boards. A second analysis also pointed to lack of women in leadership roles as a drag on pay for women—and found a company's size and type can make a difference. Finally, a third analysis looked at recent experiences of companies in trying to address gender pay gaps, and some of the complexities that have emerged as companies try different strategies.
Limited progress among corporate boards
One way to address gender pay gaps is to bring women into leadership roles. A recent study examined the increase in diversity in boardrooms and found that women have made some gains in this area. Deloitte and the Alliance for Board Diversity collaborated on the 2018 Missing Pieces Report, which examined the progress that has been made for inclusion of women and minorities on corporate boards.
Related: At Citigroup, women earn 29 percent less than men
The report started out by noting that diversity on corporate boards is not keeping up with demographic changes in society as a whole. “While there have been a few gains for some demographic groups, advancement is still slow,” the report said.
However slow, the research shows there has been progress. Looking at Fortune 500 companies overall, the Missing Pieces report found that representation of women and minorities in boardrooms are at an all-time high. “In the 2018 census, representation of women and minorities has reached an all-time high of 34 percent—an increase from 30.8 percent in 2016,” the report said. “The total percentage of women on Fortune 500 boards has risen to 22.5 percent in 2018, up more than two percentage points from the 2016 census.”
And the rate of change in increasing, the data shows. “Overall, women and minorities have made more progress in board representation for the Fortune 500 between 2016 and 2018 than between 2012 and 2016. This increased rate of change, while still slow, is encouraging,” the report said.
Company size, type, make a difference
A study from Willis Towers Watson also looked at leadership roles for women, focusing on executive roles: CEOs, CFOs, and NEOs (named executive officers). The researchers said that many companies are working to reduce gender pay gaps, but that the results are mixed.
“In the case of gender pay equity, the pay gap is largely due to the lack of representation of women at executive levels,” the report said. “Our findings show that while the lack of female representation is prevalent, it varies by industry. Further, lack of representation in larger organizations is also affecting equal pay: Even among comparable roles, we see pay differences between men and women emerging depending on the employee's role and the organization's size.”
This study found that no industry has women executive officers at a rate of more than 30 percent. Utilities are among the highest: women make up 20 percent of CEOs; eight percent of CFOs; and 22 percent of other NEOs.
NEOs—named leadership roles outside of CEO and CFO ranks—equaled 20 percent or more for women the communication services and materials industry areas. But in other industries, the percentage of women in leadership positions remained low. In seven of the eleven categories, for example, women CEOs were at less than 5 percent.
Another interesting finding was that female CEOs make slightly more in compensation than their male counterparts. However, in the other two categories, male executives have higher rates of compensation. In all categories, these gaps increased as the size of the company increased, but the difference was most dramatic in the NEO category.
Many pitfalls on the path to closing the gap
As a report by the Harvard Business Review recently noted, companies may find it difficult to address this issue by simply giving women employees raises across the board. And a review of individual employees with the goal of closing obvious pay gaps can run into problems with objectivity and fairness—and can also be problematic for the company's bottom line.
HBR's approach calls for setting a list of defined priorities to address gender pay disparities. “These priorities may be things like minimizing the overall increase in the wage bill, capping raises to individual employees in percentage terms, maintaining pay differences across job categories to reflect different job responsibilities and to incentivize good performance, avoiding large discrepancies with the external job market, and paying women fairly in the context of your firm,” the study's authors wrote.
There are many pitfalls with these efforts, the study warned. Companies that find creative ways to ease the financial pain of equalizing pay may be accused of trying to game the system. Large raises based on statistics may be seen by employees as merit-based, even if that employee isn't a strong performer. In some cases, lower performers could end up with higher raises than high-performing employees. The resulting mixed messages can be a headache for managers and HR departments.
The analysis urged a long-range, systemic approach to the problem. “Think about the HR processes that led to the gender pay gap arising in the first place,” the report says. “Are women disadvantaged on intake? In ongoing raises? Are there large gender disparities in representation in different parts of your firm? Are you suffering a high rate of attrition in your female employees?
The report concluded by saying these problems won't be solved overnight, but making incremental progress and identifying the issues that are of concern to women employees is a good start, and will help companies compete for top talent.
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