A compensation equity expert dissects what it takes to close the pay gap at any organization

Lucy Brewster here, filling in for Sheryl today and tomorrow. It seems the more things change, the more they stay the same.

That may be a cliché, but it’s certainly true when it comes to the persistent pay gap. In 2002, American women earned roughly 80 cents for every dollar earned by a man, according to data from the Pew Research Center. In 2022, two decades later, that metric was 82 cents to a dollar. In 2022, Black women earned 70% as much as white men, and Hispanic women earned 65% as much.

Research firm Morningstar outlined its path to creating a comprehensive pay equity program in its recent global sustainability report. I spoke to Gabriel Presler, global head of enterprise sustainability for Morningstar, to understand how CFOs and C-suite executives across industries can design and execute a comprehensive pay equity program to pay employees fairly and comply with increasingly global regulations requiring corporations to disclose their employees’ wages.

“A lot of firms do feel unready,” explained Presler, referring to the lack of wide-scale progress in past decades. “The issue can’t just be the domain of only the talent and culture of organizations. The executive leadership team has to understand the data and look to the numbers to set out a roadmap for improvement,” she added.

Data is the name of the game

“A key part of approaching this as executive leadership is being curious and fluent in the data,” explained Presler. That goes way beyond just understanding who is paid what. Presler explained that companies need to understand the different elements that go into determining an employee’s pay besides just job performance, such as variety in training programs or how many people a person manages. To gather useful data, organizations can create similar groups based on functions to evaluate if people are being paid fairly across the company.

Presler emphasized that gathering data for a pay equity program requires collaboration across parts of the organization. “For newcomers to this kind of work, there needs to be a big effort around communicating and aligning the organization and organizational leadership around what this means and what their goals are,” she explained. “Firms need to [bring together] the CFO, the head of talent, culture, the chief corporate sustainability officer to understand the power of this kind of transparency in an organization, what it can do for employees, what it can do for shareholders, and making sure that the board is aligned to go forward,” she explained.

Progress requires transparency

Presler believes that organizations should disclose what their initial data shows about pay gaps in the company to show they are committed to addressing the problem and get employees engaged. “Although firms may shy away from transparent disclosure, stakeholders respect an honest reflection on the state of the business with the expectation that it will lead to programmatic changes,” Presler explained.

After evaluating the data, it’s important that companies not only fix the immediate pay gaps, but address the overarching trends they see in the data. Presler explained that many organizations will have to dig for additional data to create a program that works long-term. “For example, if the adjusted pay gap is a persistent problem, where people are underpaid for equal work, it may be useful to dig into more internal data on the job groups that are common outliers causing inequity and specifically target proactive compensation strategies for those functions,” she explained.

Keep in mind a successful program isn’t a one-and-done, either. Morningstar itself, for example, evaluates its pay equity data twice a year. Every company may run on a different timeline, but organizations need to commit to pay equity as an ongoing part of their mission to see results.

Lucy Brewster

Twitter: @lucyrbrewster
Email: [email protected]

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Leaderboard

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Overheard

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—Adrienne Harris, superintendent of the New York Department of Financial Services explained to Coins2Day's Leo Schwartz her approach to regulating cryptocurrency