Big banks need to stop tinkering with gender pay-gap data
Most large banks are scared to share companywide wage data with investors, especially if it reveals the true extent of global gender pay inequity.
Bankers worry that double-digit pay gaps will drive negative headlines, opening a Pandora’s box to shareholder measures that seek to level the playing field for women, particularly at the upper echelons.
But the risk of inaction is far greater than the risk of sitting still.
For one, investors expect an honest accounting of the problem. That is, how money flows according to gender and race within companies, and how that inequity impacts diversity goals. Investors are voting their shares to make that intention known.
Second, corporations today stand to benefit more from voluntary median-wage data disclosure than from hiding in the shadows. And banks can leverage a growing public awareness that, despite a gender pay gap, a new generation of Americans are willing to work together — across private sector and political divides — to address these issues in meaningful, measurable ways.
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In 2019, the voices demanding gender pay equity have been louder and more organized. The U.S. women’s soccer team had a striking impact — not just by winning the World Cup to cheers of “equal pay,” but leveraging their voices to partner with the “Time’s Up, Pay Up” initiative and corporate challenge.
The media spotlight is substantially brighter now, and these activists aren’t going away. In an environment calling for action, companies taking a “no comment” approach or denying that gender pay gap exists will be in far worse shape than those taking some lumps in the press for accurately reporting reality.
To be clear, women aren’t laying the blame on one or two bad actors.
There are no “bad banks” to call out. Pay inequity is a systemic problem and we are witnessing a broad-based national consensus that it needs to be addressed, and soon.
New regulations by the Equal Employment Opportunity Commission that took effect Sept. 30 will get us partway there. Companies are now required to report wage data to the government across gender and race.
So what’s standing in the way of banks coming clean to their most important stakeholders? Their investors.
Unfortunately, banks are playing a frustrating shell game with shareholders who are using the power of their ownership stake to fight for median, companywide gender pay disclosure.
In 2017, my company, Arjuna Capital, requested that some of the largest banks release detailed reports on the percentage pay gap between male and female employees across race and ethnicity including base, bonus and equity compensation. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, Mastercard and American Express all rejected these proposals.
In 2018, Arjuna persuaded nine of these same companies, and others, to publish their gender pay gaps. However, that data only told half the story.
Companies published their “equal pay for equal work” gaps. That is, whether women and minorities are paid fairly versus their direct peers, but not whether they are actually holding high-paying jobs.
We applauded these companies at the time because the “equal pay” measure was an important first step toward addressing a large-scale problem that will take decades to remedy at the current pace of change.
And we are proud of Arjuna’s shareholder effort to press 22 of the country’s financial, tech and retail giants to close the “equal pay” gap. But it’s not the whole story.
We widened our lens in 2019 by also requesting the “median pay” gap at 12 companies.
Median pay measures how women are paid on average across an entire organization; and effectively whether or not women are holding as many high-paying jobs as men.
In the U.S., women are paid 80 cents on the dollar versus men on a median basis. And that gap yawns wider when intersecting race with gender.
Reporting both “equal pay” and “median pay” gaps together provides a far more accurate reflection of the pay gap problem — whether women are paid fairly versus their direct peers, and whether they are holding as many high-paying jobs within a company.
That level of transparency goes a long way toward solving the problem.
For example, gender pay gaps can actually shrink when a company is discloses disparities in gender pay, resulting in more women being hired and promoted, according to research published in the Harvard Business Review. Not only is there greater equity, but greater diversity in leadership, which leads to material performance benefits.
Despite the shifting landscape toward equal pay reporting, all but one major financial company have dug their heels in, with some responding in a highly defensive posture. The exception was Citigroup, which in January became the first U.S. company to disclose its median gender pay gap.
This year, Wells Fargo, Bank of Fargo and Mastercard unsuccessfully attempted to block Arjuna’s median pay shareholder proposals through the Securities and Exchange Commission. The companies argued that disclosing the median pay gap between men and women amounted to micromanagement. The SEC denied the legal maneuver to block shareholders from voting on the measure.
In addition to the legal challenges, we heard a lot of whataboutism this year from big banks, dismissing median gender pay gap as not a useful or actionable metric, and hark back to equal pay disclosures made in 2018.
None of this is helpful to the banks, their investors or the women in this country that face systemic discrimination. There is also no immediate signal to expect a sea change from financial companies toward greater transparency and action. However, there are now three big factors at work that make it nearly impossible for banks to continue to play a shell game with their investors.
First and foremost, companies that operate in the United Kingdom are now under mandate to disclose median gender pay gaps.
In 2018, Bank of America revealed a 29% median pay gap for its U.K. operations. And Chase has a 26% median gender pay gap in the U.K.
The numbers are eye-opening because they very likely reflect companywide systemic gaps.
Citi published similar wage data for its U.K. operations in January with a global median gender pay gap of 29%. The cat is out of the bag.
Second, after a two-year delay caused by the Trump administration, the EEOC has moved forward with a new policy to collect pay data across gender and race from employers with at least 100 employees. The EEOC mandate once applied to just federal contractors but has rolled out widely this fall.
This means large U.S. companies, including banks, will need to adjust their internal process for wage data collection and prepare to disclose numbers to the federal government.
Third, increased public awareness and well-publicized campaigns to close the gender pay gap will apply direct pressure on the corporate sector, such as financial companies.
In May, Arjun Capital and others joined Quartz to launched The Pact, providing a free resource to companies that want to improve gender equality. Efforts like this help ensure that leading U.S. companies are called to account.
As early as 2020, there will be abundant pay data available to U.S. lawmakers. The U.K. operation numbers will continue to be reported and serve as a proxy for companywide pay gaps, and public outcry will be elevated to a new level. There will be little incentive for companies to continue hiding median wage data from investors.
We have entered a new chapter in the struggle for pay equity in America.
More than ever, we need leadership from our corporate leaders, not sleight of hand. If a moral case is not enough, consider the business case for change.
Companies can’t simply claim to be global leaders in supporting female employees in order to gain top female talent. It’s time for an honest accounting of the problem and real change.