The problem with pay equity efforts

Efforts to close the gap in executive pay between men and women typically focuses on median pay rates. Yet new research finds that the women are more likely to be paid near the median, and are missing out on top-level compensation.

In a new report, S&P Global examined the change in the gender pay gap over the past 15 years, finding that female executives are more likely than their male counterparts to be paid in a tight range around the median — and are less likely to get paid at the high end.

“Firms have been focused on median compensation, but because the high end of the compensation range can be much farther from the median than the low end, the result has been a net disadvantage for women’s pay equity,” S&P Global said.

The report found that, while median pay has been increasing over the past 15 years, the mean pay ratio has been declining over the same period.

“In their push to address pay equity, companies have focused on one statistic — median pay — while losing sight of the larger picture. This suggests that companies are focused on the optics of the problem, rather than solving the problem,” said Daniel Sandberg, senior director of quantamental research at S&P Global Market Intelligence, and author of the report, in a release.

“We hope this research sheds light on a worrisome trend and helps firms reevaluate their approach to closing the gender pay gap,” he added.

The report, which covered more than 80,000 executives at firms in the Russell 3000 index between 2006 and 2020, also noted that while the share of senior positions held by women rose to 19.2% in 2020 from 15.4% in 2018, there’s still a long way to go to reach equality.

“While this progress is statistically meaningful, at this rate women have at least one to two more decades before they reach parity in their representation across senior roles,” S&P Global said. “In positions where women’s progress has been slower, such as CEO, parity will likely take even longer.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.