Gender Pay Gap ‘Sabotaging’ Diversity and Firm Profit

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The industries with the largest gender pay gap have been identified in new research by the University of South Australia that highlights female executives are being paid 30-35 per cent less than male counterparts by the majority of Australian employers.

The study assessed 539 ASX-listed firms across 10 years of data to identify the implications of gender pay disparity in top management teams. It also found large gender pay gaps were directly associated with lower firm performance.

Carol Kulik is a Research Professor at the University of South Australia’s UniSA Business school, Centre for Workplace Excellence. She said the study confirmed Australian businesses were not compensating men and women equally, were effectively “self-sabotaging their diversity efforts and overall firm profit”.

“It might surprise people that gender pay gaps exist at very senior levels, but with senior performance criteria often vague and subjective – and gender stereotypes still rife – the resulting imbalance* is commonplace,” Prof Kulik says.

“We hear a lot about the benefits of women in executive levels. They provide different views and perspectives, reduce risks, improve decision-making, and promote performance, but if a firm has a large gender pay gap, promoting women to the top team will neither deliver benefits for the individual nor the organisation.”

Top 3 industries with large gender pay gaps:

  1. Energy (oil & gas drilling, but excluding mining)
  2. Information technology (technology hardware, software, semiconductor)
  3. Industrials (machinery, transportation)

Industries with small gender pay gaps:

  1. Health care (both products and services, pharmaceuticals)
  2. Financials
  3. Consumer Staples (food, beverages, and personal products)

“Our research shows that gender pay disparities in top management teams negatively moderate the relationship between the women’s representation and subsequent firm performance.

“In dollar figures, if a male executive is paid 2.6 times that of their female counterpart, every woman added to the team will lower the firm’s annual return on assets by 2.2 per cent.

“The cause, we suspect, is that underpaying women sends a powerful signal that the organisation has low expectations about women’s contributions – that women executives have a lower status and less influence than their male counterparts.

“Women executives are then less forthright with their views; and men are more likely to discount their female colleagues’ opinions.

“Ultimately, a gender pay gap reduces the extent to which women’s voices can influence the executive’s actions and decisions, so the firm gets no value from the diversity within the team.”

The study controlled for executive quality, ensuring comparable education, executive role, tenure, and board memberships, to ensure women were not being discounted because they had less to contribute.

*The typical gap between a male and female executive (using ballpark 2020 figures) is $1,385,457 as compared to $923,638.

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