Fairness at the top

EOWA recently released a study of remuneration of the very top of the Australian corporate tree. They took the public information about the top 200 listed companies, their five highest paid executives, their top management team – described as executive managers (CEO and director reports) and analysed the gender splits by role and salary.

They point out in the study that there is no “statistical significance” problem with this – it is the entire universe of listed companies. High level numbers of interest:

  • 12% of all the “executive managers” are women, with the highest proportion (39%) in the HR role, smallest (3%) in the CEO role.
  • in 10 of 13 positions, the median female remuneartion is less than the median male salary – by up to 50% for CEO and CFO
  • the three positions where the median female remuneration is higher are strategy, communications and support
  • in all line positions, female median remuneration is 28% lower than male median remuneration
  • in all support positions, female median remuneration is 38% lower than the male equivalent

The big question in all of this, for me is understanding the main reasons. There are two likely reasons, which interact. First, is that women are much more likely to be in the lower status jobs. Women in the study are clustered in HR, Communications and Legal roles. They are also much more likely to be in the second tier of the ASX 200 – the second 100 rather than the first. The second possibility, which is impossible to prove or disprove with this data, is that women are likely to be seriously underpaid compared with men for the same role.

The study tries to tease out some guidance as to whether the second issue is a major contributor – looking at different roles and how likely they are to be one of the top five paid executives at a company, depending on whether they are male or female. For example, in HR, one of the roles which has a significant number of women in it, half the 55 men in that role are in the top five earners at their company. But only 20% of the 38 women are in that top 5. In IT, 55% of the men make the top five earnings, but only 25% of the women.

So I think it is very plausible that there is some serious underpaying of women going on for the same roles. At the steps immediately below the top table, corporate culture dictates that remuneration is very opaque. Nobody knows how much anybody else is paid. In that kind of situation, the aggressive negotiator who has a high regard for their own value is much more likely to be well paid than the person who relies on the company to do the right thing, and meekly takes the remuneration offered. And it is much easier for the company to offer wildly unequal levels of remuneration. The higher you get in any organisation, the less your position is directly comparable with others. It’s much harder to work out what the market is, and so the employer is in a much stronger bargaining position from that information asymmetry. In my experience of managing remuneration reviews over the last five years or so, women are more likely to be at the meek end of the spectrum.  Since remuneration is usually reviewed compared with what you are currently getting, a few years of lower increases can add up to a substantial difference after a while.

And many managers do, unconsciously or consciously, discriminate against women. I’ve written about this before – the same trait in men and women – say ambition – is often regarded much more negatively in a woman than a man. And that will definitely feed through into performance reviews and remuneration outcomes. 

These days, most stories about women in the corporate, professional, workplace tend to suggest that discrimination is old hat – it might still happen, but much of the discrepancies are from other causes. That what might be holding women back is about workplace flexibility, or lack of mentors, or childcare responsibilities. But this study plausibly suggests that there’s still discrimination happening in the corporate world, and it applies from the very top.

  3 comments for “Fairness at the top

  1. January 31, 2008 at 4:35 pm

    I think you nailed it in the last paragraph. I used to work at Deutsche Bank and there wasn’t wage differences based on sex amongst traders and sales in the investment bank, but there was a clear skew in sex of employees. I don’t believe this was ever intentional. I was always perplexed to see job applications for new positions being mostly men and only a few women. It was frustrating as we/management was continually trying to get the mix more neutral. My female colleagues (mostly in sales interestingly) often cited child care problems as agonising. Also long work hours was another problem that lead to them leaving their job or not going for higher positions for the sake of the kids (one of the reasons I left the bank to work in Saasu). truthfully though I think men wouldn’t take the responsibility for sorting out the child care and long hours issues. The default setting, being mum’s problem would kick in. I remember plenty of couples both earning good money in the markets where dad would stay and mum would leave her career.

    I firmly believe 3-4 day weeks where both parents have a career, both enjoy raising kids is a good option. That said, I’m a bit hypocritical because I’m not doing ti myself at the moment 🙁

    Corporates need to take on new ways of retaining employees, in particular successful career women and giving dad’s the ability to work a shorter week. Corporate culture still needs amending

  2. misselaneius
    February 1, 2008 at 1:06 am

    One of the reasons that women don’t get paid as much is that after they have kids, they realise that human interaction is worth far more than corporate advancement. Funny how common sense can strike you like that.

    What we need is a corporate environment where childcare is an automatic benefit, next to discounted health plans and gym facilities onsite. What we need is for society as a whole to reassess how much we are willing to lose fantastic talented people by requiring them to make a choice between career and family, and find creative ways to balance the two.

    Once we do that, the pay gap will close itself. I’m not holding my breath.

  3. February 1, 2008 at 11:52 am

    I think that the issue of transparency does go a long way toward solving this problem, though clearly it helps if dads are more involved in their kids’ lives, and willing to fight alongside the moms for reasonable work and time off schedules.

    At the place that I work, I’m at the top of the salary schedule for people in my category, which is sort of middle-management. I know that I’m paid equally with my male co-workers, because there is one set schedule for everyone–there’s flexibility as to where one gets placed on the schedule, due to experience, and it is possible to advance. But I don’t have to spend time wondering if men are making more than me (or not wondering, and then getting shortchanged), because the salary schedule is approved by our board every year in a public meeting. (Well, and also because I do the budget for our department, but not everyone gets to do that.)

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