Mind the Gap: Steps Toward Leadership Pay Equity
By Donna Padilla and Joyce De Leo, Ph.D. Pay equity for women and people of color in leadership is imperative – however, recent gains have...
By Donna Padilla and Joyce De Leo, Ph.D.
Pay equity for women and people of color in leadership is imperative – however, recent gains have been modest. Some organizations espouse that issues around pay will solve themselves as more women and minorities move into the C-suite. In our experience, this is not occurring because the numbers are increasing at a glacial pace and inherent obstacles remain which prevent equal pay.
The following are our recommendations for taking incremental steps towards better balance of compensation among leaders:
- Be cognizant of pay equity laws. Many states and cities have enacted pay equity laws that prohibit the hiring authority and search firms from asking specific information regarding a candidate’s current compensation. These can also include prohibiting the use of publically available compensation information as a factor in determining an offer. This is a very dynamic area of regulation and we recommend at the outset of an executive search to confirm the regulation that applies to your organization. Once confirmed, it is critical to ensure that all stakeholders are aware of what can and cannot be legally asked as it relates to compensation.
Regardless of the legality, many organizations have moved towards the approach of asking for “salary expectations” as it mitigates the potential to under-compensate a qualified candidate based solely on their last compensation package. Without this simple modification, salary inequities for women and people of color will persist.
- Understand the need for greater diversity across C-suite and senior roles. Salary discrepancies between white men and women and diverse executives and administrators are often a product of the positions they hold. Men are more likely to hold top-earning roles like CEO/president, COO, and CFO, which skews the salary imbalance. Until women and minorities gain better representation in these roles, pay equity will be hard to achieve. Mentoring, nominating and supporting women and people of color for high-paying roles both within their current organizations and for external opportunities will limit this gap.
- Be fair and open in discussing candidate expectations in compensation negotiations.
The best practice is not to base future salary on a leader’s previous compensation. Within your organization, utilize midpoint, candidate expectations and market ranges to help inform the compensation package. This will require being up front with candidates if their expectations are beyond the proposed compensation range. This brings up a broader conversation regarding pay transparency about what a particular role will pay within an organization. It is often taboo in some organizations for current employees to discuss their compensation with peers. This propagates pay inequities.
Focus on the candidate’s compensation expectations including:
- Expectations or requirements by specific elements of compensation (e.g. base salary, bonus) and benefits (e.g. deferred compensation);
- Compensation necessary in the transition to a new role due to forfeited compensation associated with the candidate’s resignation from their current employer (typically equity and deferred compensation);
- Questions about competing offers and the candidate’s expectations for a competitive offer.
Again, do not discuss or seek candidates’ current and/or historical compensation by public sources or other methods.
- Embark on a comprehensive organizational review of current compensation at the senior leadership level. We often observe a delay in discussions and decisions about specific compensation until finalists are selected. We recommend a proactive look at compensation models for the executive suite prior to the launch of a search. In this way, compensation is informed by competitive market ranges and current structure vs. responding only to candidate expectations or, in the worst case, the current candidate’s salary.
Incremental progress is essential to narrow the gap for pay among women and people of color in top leadership roles. We have outlined several steps to take to achieve more equitable compensation which will foster diversity of people and thought at these highest levels.