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We all mind the gap

The increasing pay gap between men and women is disengaging the workforce. Stephen Welch, a Director at Hay Group, considers whether recent public, shareholder, regulatory and media pressures on executive pay, have had a negative effect on women’s level of engagement at work.

While executive pay and bonuses across Europe have remained relatively flat, the pay gap between women and men has risen, according to the latest Hay Group research. While men’s pay is more or less in line with inflation, overall women directors have not seen a pay increase at all. There is now a nine percent gap between men and women in board positions. Further analysis shows there is significant under-representation of women directors, on important board committees such as risk, audit and remuneration. The number of committees on which they sit often determines board members’ pay, and while there has been progress at overall board level in appointing women, the detailed committee work is still mainly a male bastion. For example, half of audit committees and three in five remuneration committees have no women on them at all.

In general, this means that women tend to have smaller roles on boards, and therefore get paid less. Job-per-job, or role-per-role, women get paid about the same. It is just that they get fewer opportunities. This knowledge is based on publicly available evidence. What messages do companies communicate when they ‘advertise’ that they don’t put women on the key committees; or publicly announce they are paying their female board members less; or post on their websites that their key committees don’t have significant female representation? This is symptomatic of a wider trend in businesses and how they are reacting to the continued lack of growth. Organisations are focusing less on long-term people issues than they were a few years ago. For example, our latest employee engagement research (based on over a million European employees in the last year) shows that barely half feel they receive learning and development opportunities, or think they can achieve their personal career objectives by staying with their current employer.

You might suggest that companies have said to themselves: “We don’t need to worry about engaging our people. High unemployment means that they should consider themselves lucky to have a job. Let’s focus on improving how we work instead”. But this doesn’t seem to be true either: Hay Group research indicates that only 46 percent of employees are truly effective. That means that in an average company, over half of employees are not as productive as they could be. So whatever definition we have of engagement, we can paint a picture of a workforce who feel they don’t get opportunities, think their future lies elsewhere, and feel their organisation doesn’t enable them to deliver results. Oh, and if you are a woman on a board, you’ll have fewer opportunities, too.

This lack of engagement and enablement is an issue in both the short- and long-term, for all employees and their employers. In the short-term it means that companies are full of people who are busy, but unproductive. They feel blocked by their employer and want to escape. In the long-term, the lack of opportunities for both men and women mean that companies are not investing in their human capital and therefore should not be surprised when they don’t get a return. These companies are in real danger of losing their best people and de-motivating the others. If your best assets leave then the average of the rest of the organisation will decline, this seems like a bad strategy when you need every asset possible to compete during a difficult economic period. It might seem easy at the moment to cut costs and reduce opportunities, reduce promotions and be content when people leave “great – that’s one fewer on the wage bill”! But this comes at a long-term price: the price of de-motivated people, the price of even more people leaving, and the price of few opportunities for those who stay; especially if you are a woman. While the economy continues to struggle, the risk is that the gender pay gap won’t be a focus for businesses, and will be a further issue that demotivates an already jaded workforce.‎

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