Gender pay gap shows stock-option excess

The gender pay gap among the top ranks of US firms ought to be narrowing. Corporations have long been under pressure to increase the number of women on their boards. And yet the measure has widened.
This should sound an alarm over the persistent lack of women in leadership roles — but it also underscores how stock-based compensation is fueling excess pay for CEOs and exacerbating inequality in general. The gender pay gap is normally assessed across a firm’s entire workforce and is useful in highlighting the under-representation of women in an organisation’s upper echelons. Calculating the gender pay gap just for the very top, meanwhile, captures the imbalance specifically among the key decision makers.
A recent study by research firm Morningstar employed the latter approach and reached an unwelcome conclusion. The proportion of named executive officers (typically those with “chief” in their title) occupied by women has been steadily rising, yet in 2020 the gender pay gap at this level widened, as men in so-called C-suite roles received sizable increases in stock-based compensation. That is best explained by the fact that stock-based pay is more common in CEO pay packages, where men are in an overwhelming majority, compared with those of other executives.
The result spelled a reversal of the narrowing trend in the executive gender pay gap between 2015 and 2019. Pay earned by women in top roles was 75% what their male counterparts made in 2020 — the lowest proportion in the last nine years that Morningstar has been running the survey.
For ESG investors, there are two lessons. First, the pace of change in making the seat of corporate power more representative of broader society is still glacial. Since 2012, the proportion of women in C-suite roles has risen from 8% to 14%, a relatively big jump but from an already low base to an only slightly better number. The impression is, so long as a firm does not have an exclusively male senior team, it feels less pressure to keep spotting, developing and promoting female talent. “One and done” should not be the philosophy. Just over half of S&P 500 constituents had at least one female C-suite officer in 2020. Only 16% had two or more. The number of women in the CEO role was just 5.5% — barely changed from 2012’s 4.3%.

—Bloomberg