What boards can do about women executives being short-changed

The Workplace Gender Equality Agency (WGEA) is a federal agency reformed in 2012. Its recently published, and first, Gender Equity Insights report provides stark analyses on the impact of inequality.

The report findings show the greater levels of remuneration received by men compared to women in almost every scenario, but particularly in more senior occupation levels. The large and persistent gender pay gaps among managers highlights the likely evidence of biased behaviours throughout organisations, where men are given preferential pay treatment over women in senior management levels.

These differences in remuneration at the top end of the occupation scale are shown to have severe negative impacts on women’s expected career earnings. Women progressing through managerial levels at the same pace as men can expect to earn $600K less in a ten-year period!

A more positive finding borne out by a special investigation within the report, reveals the benefits of increased representation of females on governing boards and how this trickles down to reduced gender pay gaps across the organisation.

Each item in the summary below is a useful checklist for the board in framing its measurable diversity objectives. These are a required disclosure (on an ‘if not, why not’ basis) for ASX listed entities in the ASX Corporate Governance Council’s Principles and Recommendations (see recommendation 1.5 on page 11 HERE).

The suggestions in the checklist are easily measurable, and are common indicators of bias that, if measured and reviewed frequently enough, can be corrected.

Key findings of the report with a suggestion as to how boards can utilise these findings as a checklist measure to overcome bias, and feature in their annual diversity report, are summarised below.

$100K annual pay gap for top tier managers

Women key management personnel (KMP) working full-time earn on average $100,000 a year less than male KMPs. WGEA data shows an average total remuneration of $244,569 for women at KMP level, compared to $343,296 for men. Gender pay gaps are significant across all management categories and the gap grows in line with seniority.

Checklist #1: Measure and report gender pay ratios at each grade or report level in your company. Establish a base year and set achievable objectives to close the gap. That might be a 3, 5 or 7 year period.

Career-long penalty for women

Gender pay gaps lead to significant earnings shortfalls for women across their careers. The analysis shows that if women and men move through managerial positions at the same pace, working full-time and reaching a KMP role in their tenth year, men can expect to earn $2.3m and women $1.7m in base salary over this period – a difference of $600,000. Even in a scenario where women move towards a KMP role at a rate twice as fast as men, their accumulated earnings would will still be lower than that of men – $1.6m compared to $1.7m. Put another way, even women who twice as good as a man will earn less!

Checklist #2: Measure and report gender pay ratios on tenure i.e. for year of service category. Set an objective to review and determine the rationale. Compare year on year.

Women managers fare better in male-dominated industries

Female managers are more likely to be remunerated closer to their male peers if the managerial environment is heavily male-dominated.

Checklist #3: Measure and report gender pay ratios in accord with gender of supervisor. Compare to prior year.

Male managers fare better in female-dominated industries

Conversely male managers working in female-dominated organisations can expect to earn considerably more than their female colleagues. Are women their own worst enemies? See the next item.

Checklist #4: Measure and report gender pay ratios in accord with gender of supervisor. Compare to prior year.

Women on boards narrow the pay gap

Significant reductions in gender pay gaps was found where there was increased representation of women on boards. There was evidence of a 6.3 percentage point reduction in the gender pay gap for full-time managers and 7.8 percentage point reduction for part-time managers when the share of women on boards increased from zero to equal representation.

But, gender pay gaps in male-dominant organisations fall more than those in female- dominant organisations when female board representation rises.

Women remain under-represented on boards, with the data showing just under one in five board directors and one in eight board chairs are women; and nearly four in ten organisations have no female representation on their boards.

Checklist #5: Measure and report gender ratio for the board. Compare to prior.

The male ‘bonus’ premium

Both women and men receive additional remuneration beyond their base salary, which can include superannuation, bonuses, share allocations, allowances, overtime and other discretionary pay. However, men consistently earn more additional remuneration than women. Women working full-time are paid an average of an additional 18.1% of their base salary in extras and men an additional 25% of their base salary. That leads to an average male ‘bonus’ premium of almost 8 percentage points for full-time workers. The male ‘bonus’ premium is highest in the financial and insurance services industry at 15 percentage points.

Checklist #6: Measure and report gender incentive payment ratios by grade or reporting level. Compare to prior year.

Where to find the report

The WGEA report can be found HERE


© Guerdon Associates 2024
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