How shareholders can impact the gender pay gap

That depends on how you look at it. Women in non-CEO roles are still receiving less pay than their male counterparts. Surprisingly though, that’s not necessarily the case at the CEO level. This is according to a study by Assoc Prof Canil and colleagues who looked into the impact of Say on Pay voting on remuneration packages in the US.

Say on Pay (SoP) voting, required by the Dodd-Frank Act, gives shareholders the opportunity to vote on remuneration packages. SoP does make boards more accountable for their actions and decisions, especially when it comes to excess compensation, but can they remain unbiased when it comes to rewarding leadership performance? For the first time, SoP data gives us a clearer and more detailed understanding of shareholder preferences and decisions.

It’s the shareholders who are saying no if they determine that someone is getting paid excessively – but they are more likely to allow it for men than women.Associate Professor Jean Canil

Assoc Prof Canil and colleagues analysed this extensive database of voting trends and found that women in non-CEO roles are less likely to receive a positive endorsement from shareholders for a robust remuneration package. Shareholders are more forgiving, however, towards their male counterparts, approving packages that might be considered excessive. Overall, non-CEO women are consistently receiving a lower paychecque than their fellow male board members, likely for the same work and with the same experience and qualifications.

Perhaps encouragingly though, the data also revealed that this gender bias did not seem to apply to the very top positions. Shareholders regard female CEOs no differently than their male colleagues and are likely to vote against what they perceive as over-compensation, regardless of gender. When packages are approved, in some cases, female CEOs are actually earning more than their male colleagues.

There is no discernible reason for why shareholders might be willing to reward a female CEO but not, for example, a female CFO. ‘It’s the shareholders who are saying no if they determine that someone is getting paid excessively – but they are more likely to allow it for men than women.’

Nor does it get any easier for female board members when their CEO is female. ‘Unfortunately,’ says Assoc Prof Canil, ‘when women get to the very top, they tend to pull the ladder up behind them. It’s just such a competitive environment.’

There’s no doubt that incremental change is taking place in the workplace, but there is still much to be done to reduce the gender pay gap. Hopefully, results like those produced by Assoc Prof Canil’s study will generate more awareness about the issue, and trigger further attention, discussion and ultimately progress.

Jean Canil, Sigitas Karpavičius, Chia-Feng Yu, 2019, ‘Are shareholders gender neutral? Evidence from say on pay’, Journal of Corporate Finance.