I’ve written about gender equity issues in this space before.* Now it seems everyone is talking about it. Whether that’s just election-year politics or a social justice issue whose time has come, I’m not sure.
On April 8, President Obama marked “Equal Pay Day.” This day is the point in the current year marking how much longer a woman must continue to work to earn the same amount that a man in a similar position earned during the previous calendar year. The President issued an Executive Order and a Presidential Memorandum addressing the gender gap in compensation.
The Executive Order prohibits federal contractors—that includes banks with more than 50 employees—from retaliating against an applicant or employee who discusses his or her pay with another person. This gives teeth to a long-held National Labor Relations Board (NLRB) position that discussing salary information is “protected concerted activity,” whether or not the workplace is unionized. The aim is to increase transparency and thus encourage employer compliance with pay equity laws.
Some banks still cling to a policy—written or unwritten—of secrecy about pay decisions. Now would be a very good time to review that policy and let in some air.
The Presidential Memorandum directs the Secretary of Labor to propose regulations on the collection of compensation data by gender and race. Again, the executive action is directed at federal contractors. The Office of Federal Contract Compliance Programs (OFCCP) has already been requiring the submission of this kind of data in connection with compliance reviews.
The Proposed Rule will be issued within 120 days. Then there will be a comment period before a Final Rule is issued.
Will this new reporting requirement help reduce inequities in pay? Or will it just create another time-consuming administrative burden for banks?
Analyzing compensation is a complex task. It involves review of multiple factors such as seniority and performance. Summary data is of little value.
The administration has been trying since 2009 to get the Paycheck Fairness Act passed. It looks unlikely to go anywhere in this Congress either.
The current bill proposes for all employers what the President now seeks to require of federal contractors: to report compensation data by gender and race. More to the point, it would whittle away employer defenses to pay challenges by requiring employers to show disparities in pay are based on “bona fide” factors “consistent with business necessity.” That is a very high standard.
The recent executive action on pay equity seems to be another example of President Obama’s frustration with a “do nothing” Congress. However, it does draw attention to an issue that has flown under the radar for too long—in spite of existing law.
Both the Equal Pay Act of 1963 and Title VII of the 1964 Civil Rights Act outlaw gender discrimination in compensation, yet in spite of equal college and post-college graduation rates, women who work full time earn only 77 cents for every dollar men earn. The figures are even worse for women of color. African-American women earn only 64 cents and Latinas only 54 cents for each dollar earned by a white male.
Banks are vulnerable
I have frequently come across situations where women in banking are being paid less than men with the same job title. There may be legitimate reasons for this: seniority, objectively-measured performance, additional duties.
However, sometimes the reasons for the disparity are not legitimate, even if not overtly discriminatory:
• “He wouldn’t take the job unless we matched his current salary, and he was the candidate we wanted.”
• “He has a stay-at-home wife and three children; she’s a single woman and much younger.”
• “Although his current job doesn’t give him a chance to show it, we have a really good feeling about this young man!”
The problem is that such well-intentioned but ultimately wrong-headed pay decisions have a creeping effect. Even if both male and female incumbents receive similar raises over the years, the disparity increases.
With all this increased attention focused on pay equity, it may be worth doing a compensation analysis to find out if you have a problem at your bank.
Do devote the appropriate resources to it: competent compensation consultants and/or outside counsel.
And, before undertaking this exercise, make sure senior management has anticipated taking corrective measures if proved necessary. Nothing could be worse than identifying the problem and doing nothing about it.