The wealth gap in the United States is outrageous, as highlighted previously by the Occupy Wall Street movement and progressive Democrats like Elizabeth Warren and Bernie Sanders. The pay of corporate CEOs continues to skyrocket, even when their companies underperform, while millions of citizens struggle to earn a living wage. The earnings of the middle class have been in steep decline, but corporate boards approve ever-increasing compensation packages for CEOs. I always assumed that if more women were on corporate boards, there would be a reversal of this trend—but new research shows the opposite. While past studies show that having more women on boards is good for company performance, Gretchen Morgenson of the New York Times reports that according to a new study, “companies with greater gender diversity on their boards paid their chief executives about 15 percent more than the compensation dispensed by companies with less diverse boards.” Why might this surprising trend be happening? Morgenson notes that while no one knows for sure, some experts point to the following possible causes:
- Relatively few women (roughly 20 percent) serve on corporate boards, and those who do may feel pressured to go along with the “vote yes” culture of most boards in order to keep their seats.
- The board compensation committee determines CEO pay, and women do not commonly serve on these committees, much less as chairwomen. Morgenson notes that last year, only two out of ten committee chairs of the most diverse boards were women.
- The same women directors often hold multiple positions. Morgenson notes that nearly one-quarter of women directors at S&P 500 companies held multiple board seats compared to 19 percent of men. This group of women might be sought after because they do not rock the boat.