New research published by the University of South Australia indicates that gender pay gap remains a significant disparity across most Australian firms, with 80 per cent of them paying female executives 30-35 per cent less than their male counterparts despite being of equal calibre, education, and achievement.
The findings were a result of the study that looked at 539 ASX-listed firms across 10 years of data to identify the implications of gender pay disparity in top management teams.
UniSA researcher Professor Carol Kulik pointed out that the study confirms that Australian businesses that are not compensating men and women equally are effectively “self-sabotaging” their diversity efforts.
“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,” Kulik said. “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.”
The research also reveals that gender pay disparities in top management teams negatively moderate the relationship between women’s representation and subsequent firm performance. This means that 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,” Kulik said. “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,” Kulik added.
Co-researchers Dr Yoshio Yanadori and Dr Jill Gould also shared their observation on the findings, saying that the study should serve as a warning for organisations that are driving gender diversity initiatives.
“Organisations pay a price for gender inequality,” Dr Yanadori said. “Just because an organisation has a good representation of women at the top doesn’t mean that they are a gender-equal firm. Women’s representation is only one indicator.
“Stakeholders must dig deeper to establish whether the organisation is best positioned to use its visible gender diversity effectively,” Dr Yanadori added. “Gender diversity must be matched with equal pay. If organisations have women in senior leadership roles but pay them less than their male counterparts, they’re simply shooting themselves in the foot.”