A common gender pay gap fix may be backfiring

3 years ago

Html
Text

October 29, 2021

Good morning, Broadsheet readers! Andrew Cuomo faces a criminal charge, Electronic Arts COO Laura Miele talks inclusion, and a common gender pay gap fix may be hurting women. Have a relaxing weekend!
– Mediocre median. The idea of equal pay for equal work is simple enough. The problem is, the intricacies of the gender pay gap are anything but.
Right now, many companies—for reasons sometimes admirable, other times self-serving—are focused on making sure they aren’t perpetuating the gender pay gap among their employees. Yet not all of those employers are taking the effort to account for the complexity of that gap, and, as fascinating new research from S&P Global shows, that can mean their efforts actually end up damaging women’s earning potential.
At the root of this problem, according to author Daniel Sandberg, is companies’ tendency to focus on median pay. Make sure women and men have the same median salary and you’re all set—no pay gap, right? Well, not exactly. That strategy for managing away the gap, which the report dubs “gender-based compensation management,” actually has a secondary effect: it clusters women’s salaries very close to the median number, while men are more likely to have comp that ranges widely—some make less than the median, but plenty of others make far more.
The analysis, which examined the pay of more than 80,000 executives at Russell 3000 firms over a nearly 15-year period, suggests that as companies fixate on ensuring that women aren’t lagging behind on pay, they’re dolling out more relatively small raises to large numbers of female executives, focusing on getting their salaries up to the median. (This creates what Sandberg calls a “glass floor.”) These same employers are not using the same strategy with male employees, allowing the high performers to claim raises that put their comp above the median.
Interestingly, the report also notes that this approach to pay is also correlated with poor governance. In other words, companies where women’s incomes clustered around the median were also more likely to have been sued over comp disputes, allegations of discrimination, inappropriate workplace relationships, etc. Red flag alert!
So, for those in a position to make compensation decisions, the takeaway is clear. Don’t just look at “equal pay” as a box to check. Make sure the outcomes of your pay policies truly place women and men on equal footing—including allowing female superstars to bring home the big bucks when they’ve earned them.
Kristen Bellstrom
kristen.bellstrom@fortune.com
@kayelbee
The Broadsheet, Fortune’s newsletter for and about the world’s most powerful women, is coauthored by Kristen Bellstrom, Emma Hinchliffe, and Claire Zillman. Today’s edition was curated by Claire Zillman.

A note from Fortune

Powering the People Team: HR Insights

Human capital is the prime source of value and competitive advantage for companies, putting the Chief People Officer and HR leaders at the center of the new world of business. Download Fortune’s latest collection of insights for HR Executives:

ALSO IN THE HEADLINES

- BBB bill—explained. Lost track of what's in and what's out of latest President Joe Biden's Build Back Better bill? You're not alone. Fortune's Nicole Goodkind has a summary of Biden's updated $1.74 trillion framework, including where childcare credits and paid leave stand: Fortune
- Cuomo's criminal charge. Former New York governor Andrew Cuomo is facing a criminal charge for groping aide Brittany Commisso's breast inside his residence in December 2020. Cuomo's personal lawyer says the ex-governor "never assaulted anyone." The complaint is a stunning new development in the downfall of the Democratic political star, who just a year ago was praised for his handling of the pandemic. He'll be arraigned in Albany on Nov. 17. New York Times
- Vax or else. Jane Fraser-led Citi is requiring all U.S.-based employees to be vaccinated against COVID or else lose their jobs. "We have made the decision to require U.S.-based colleagues to be fully vaccinated as a condition of employment," Sara Wechter, head of human resources, wrote on LinkedIn on Thursday. You can read more about the bank's rationale here: Fortune
- Pay cut. Activision Blizzard CEO Bobby Kotick says he's asked his board to lower his total compensation to $62,500 until "we have achieved the transformational gender-related goals and other commitments." In July, the video game company was sued for fostering a “frat-boy” culture that led to widespread gender-based discrimination and harassment." Activision initially called the claims false and distorted, which Kotick later said was a "tone deaf" response. The CEO will hardly be hurting: he earned more than $150 million in comp last year. Fortune
MOVERS AND SHAKERS: Jennifer Hill, former CFO of Merrill Lynch, is joining the board of BlockFi, a crypto-financial services company.

CONTENT FROM MEDC

The Michigan advantage

See how the state’s manufacturing and design heritage, innovation expertise, and talented workforce are shaping the future—and keeping the world moving. Click here for more.

IN CASE YOU MISSED IT

- Lightning rod. Republican Senators have approved all of President Joe Biden's picks for top federal prosecutors—except one. Rachael Rollins, the nominee for U.S. attorney for the district of Massachusetts, is the first woman and first Black woman to be the district attorney in Boston. Republicans have vowed to block her nomination, calling her "radical" and "dangerous," making Rollins a lightning rod in the national debate over law enforcement. Washington Post
- Game on. Electronic Arts COO Laura Miele talked with Fortune about how the video game company is evaluating gender representation in its titles with an "inclusion framework" for game creators. "I just want our creators to be intentional about what they're creating and about how we're showing up in the world," she says. Fortune
- John Doe no more. Former NHL player Kyle Beach on Wednesday revealed himself as the John Doe who filed a lawsuit in May against the Chicago Blackhawks for the team's mishandling of his 2010 sexual assault allegations against the team's video coach, Brad Aldrich. (Aldrich has since been convicted of assaulting a high schooler in Michigan.) Beach said burying the incident "destroyed" him "from the inside out," and he hopes his coming forth will encourage other victims—male or female—to do the same. NPR

ON MY RADAR

FDA tightens rules for breast implants, after deaths and years of scrutiny over health risks Fortune
United States issues its 1st passport with 'X' gender marker Associated Press
Sudan’s female activists lead the resistance in wake of military coup Financial Times
Twitter’s infosec chief makes the case for cybersecurity expertise in boardrooms Fortune

PARTING WORDS

"So I try to call people and say, 'How are you doing?' not just, 'What are you writing next?'"
- Jia Lynn Yang, editor of the New York Times' National desk on her conversations with journalists who often report on traumatic events.