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Resist the itch to punish companies with a pay gap

17 April 2018 by Peter Swabey

Resist the itch to punish companies with a pay gap - Read more

The gender pay gap is far more complex than some believe

Last week, I went to the English National Opera to see Gilbert and Sullivan’s Iolanthe. One of the songs revolves around the idea that one of the things that made Britain great was: ‘When noble statesmen do not itch / to interfere in matters which / they do not understand.’

I was reminded of this when reading some of the comments from politicians about the gender pay gap, especially those threatening sanctions and even fines for companies who cannot show success in closing the gap.

Let me be clear, the gender pay gap that we have is wrong. But it is also a far more complex issue than this approach suggests, an approach that runs the risk, once again, of politicians seeking to shift the blame onto companies for their own failures.

In one example of this complexity, it has been reported that there is a gender pay gap between MPs in Parliament. When outside earnings and ministerial salaries are taken into account, male MPs earn an average 10.4% more than female MPs – and yet all MPs are on the same basic salary.

One issue reported by many of those that have revealed their pay gap figures so far is that they have fewer women in senior roles. This is often exacerbated by the fact that many of the top global roles, held by men, are based at the UK head office.

There are significant socio-economic factors at play that militate against women progressing to senior management roles and which are beyond the power of individual companies to resolve.

These will require government action or, more fundamentally, cultural change in our society. They include issues around the funding of childcare and the cultural predominance of women taking responsibility for both child and eldercare.

There are other cultural issues too, with anecdotal evidence suggesting professional women are often more likely than men to turn down opportunities to speak at events or be profiled in magazines, regardless of the fact that many may be better qualified.

This can be a useful way to help raise your personal and professional profile.

“When you recruit, pay the rate for the job. Do not ask for ‘current salary’ and then offer an increment”

But there are some areas in which companies can take action and have a real influence. Many are already considering this, beginning with a thorough review of their employment practices, but we are starting from a low base.

Our most recent Boardroom Bellwether survey, undertaken in association with the Financial Times, indicated challenges in the female executive pipeline.

Granted, this was looking at the pipeline for female appointment for FTSE 350 boards, but 59% of respondents shared the view that their female executive pipeline is insufficient to provide a sustainable pool of talented board members. Only 22% were confident that it is sufficient.

Recruitment, too, places too heavy a weight on ‘current salary’, with many employers offering an increment on that rather than the rate for the job.

If a woman is on a lower salary than a man, which could be the case for a variety of reasons, this approach will simply carry that lower salary forward into the new role, and so on throughout her career.

One suggestion for a way to address the gender pay gap goes to companies – when you recruit, pay the rate for the job. Do not ask for ‘current salary’ and then offer an increment, as this will tend to bake in existing pay discrepancies and you are, ultimately, relying on someone else’s judgment of an individual, rather than your own.

One of the most interesting – and most useful – results of gender pay gap reporting will be the ability to review it on an ongoing basis, comparing and contrasting each company’s changing position over successive years, what steps are being taken to narrow it, and which of these have the more beneficial effects.

The focus should be on getting more women into senior positions, and a wide range of initiatives covering recruitment, promotion, succession planning and retention ought to be considered.

In particular, messages about equality of opportunity should be reinforced from the bottom up and considered in the context of wider diversity.

Elsewhere, we are now moving onto the next phase of our project with Board Intelligence, looking at the production of board packs.

As part of this, we want to draw on the experience of our members to produce guidance on how organisations can make their board packs more useful, amid concerns they are too backward looking, internally focused and operational.

If you are able to contribute, please contact us at betterboardpacks@icsa.org.uk and let us know about any actions you have taken to improve the quality of your board papers, to make preparing and distributing the board pack more efficient, and who within the organisation helped to implement these improvements.

Peter Swabey FCIS is policy and research director at ICSA: The Governance Institute

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