The Advisors' Blog

– Liz Dunshee

Back in 2016, over 100 public & private companies signed the “White House Equal Pay Pledge,” which said:

…[W]e commit to conducting an annual company-wide gender pay analysis across occupations; reviewing hiring and promotion processes and procedures to reduce unconscious bias and structural barriers; and embedding equal pay efforts into broader enterprise-wide equity initiatives.

And at about the same time, there was also a rule in the works that would’ve required companies with 100 or more employees to report detailed salary information to the Equal Employment Opportunity Commission (see this Forbes article). So some people expected that companies would also disclose their gender pay analysis, similarly to what’s required now in the UK, Australia, Germany and Iceland.

Now that government-initiated efforts have stalled out, shareholders are stepping in with private ordering. But so far, these proposals typically receiving less than 20% support if they go to a vote – so should you embrace voluntary disclosure & other efforts? This Pearl Meyer survey found that a majority of companies were planning to study gender pay issues – and this Skadden memo outlines the pros & cons of disclosing the findings:

Blair Jones of Semler Brossy notes that “gender pay gap” statistics are receiving increased attention from shareholders. She recommends that boards and compensation committees discuss the issue of gender pay proactively, ideally before a company is targeted by a shareholder activist. Ms. Jones also noted that companies may want to consider disclosing policies and programs to support diversity and inclusion and gender pay equity, in addition to pay data. For example, companies could include information on recruiting and development programs and specific efforts such as unconscious bias training, in addition to pay data.

Skadden’s Marc Gerber cautions that an incorrect or materially misleading disclosure can increase the risk of litigation, so companies should strive to make gender pay disclosures as accurate as possible. Mr. Gerber noted that, to date, we have not seen securities lawsuits based on incorrect gender pay disclosure.

The Skadden memo also makes terminology distinction that’s important to keep in mind as you consider your strategy & prepare for shareholder engagement:

“Pay inequality” generally refers to the difference in wages men and women receive for performing equal or substantially similar work, while “gender pay gap” means the difference in pay between an average male employee and an average female employee and largely reflects the clustering of men in high-paying roles and women in low-paying roles. Pay inequality involves sex-based discrimination in the wage-setting process, but a gender pay gap does not necessarily indicate discrimination.