Pay Equity Disclosure 2023 is a hot topic for CorpGov.net thanks to assistance from Julia Cedarholm of Arjuna Capital, who contributed to their groundbreaking Racial and Gender Pay Scorecard. Arjuna’s efforts in this area and their reports since 2018 are impressive. Over the last seven years, 143 shareholder proposals requesting pay gap disclosures have been filed at more than 80 companies.
In 2022, nine pay equity disclosure shareholder proposals were filed. Three of them were withdrawn prior to companies filing their proxy statements, at Chipotle Mexican Grill, Target Corporation and The Home Depot. Each company agreed to make the disclosures requested in the proposal. One other proposal did not make it onto the ballot.
Of the five proposals that went to a vote, two received majority support, at Lowes Company and The Walt Disney Company, while another two received significant minority support, defined as greater than or equal to 30% of votes cast.
Average support for gender and racial pay gap proposals reached 42.6% of votes cast FOR and AGAINST, with median support of 33.7% of votes cast. (Shareholder Resolutions in Review, ISS)
Pay Equity Disclosure 2023: CorpGov.net Filings
With Julia’s help, my wife (Myra K. Young) and I (James McRitchie) have filed ten proposals on the topic so far this season. Julia’s assistance has been invaluable in negotiating several agreements for withdrawal with companies that have committed to our requested disclosures, sometimes using a phased approach. We are delighted to work with subject matter experts on other proposals that promise double bottom-line returns or address significant systemic issues and legal frameworks. (contact). Below is an example proposal. You won’t see this one on the proxy because BlackRock is “woke” enough to realize reasonable investors consider reporting on pay equity as “material.”
Pay Equity Disclosure 2023: Status of Filings as of 3/7/23
- Kellogg – going to a vote on 4/28/2023
- Boeing – going to a vote on 4/18/2023
- Intuitive Surgical – pending
- Goldman Sachs – pending
- Marriott International – pending
- Charles Schwab – pending
- DexCom – pending
- BlackRock – withdrawn per agreed timeline for disclosure
- Netflix – pending
I’ve seen opposition statements from several of the above but still consider them pending since we are still open to a negotiated withdrawal.
Pay Equity Disclosure 2023: Example
James McRitchie, of CorpGov.net, requests BlackRock Inc. (“Company” or “BlackRock”) report annually on unadjusted median and adjusted pay gaps across race and gender globally and/or by country, where appropriate, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy, and legal compliance information.
Racial/gender pay gaps are the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings.
Pay inequities persist across race and gender. They pose substantial risks to companies and society. Black workers’ hourly median earnings represent 64% of white wages. Median income for women working full time is 83% of that of men. Intersecting race, Black women earn 63%, Native women 60%, and Latina women 55%. At the current rate, women will not reach pay equity until 2059, Black women 2130, and Latina women 2224.
Citigroup estimated closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional national income. PwC estimates closing the gender pay gap could boost OECD economies by $2 trillion annually. Actively managing pay equity is linked to superior stock performance and return on equity.
Best practice includes:
- unadjusted median pay gaps, assessing equal opportunity to high-paying roles,
- statistically adjusted gaps, assessing whether minorities and non-minorities, men and women, are paid the same for similar roles.
Over 20 percent of the 100 largest U.S. employers currently report adjusted gaps, and an increasing number of companies disclose unadjusted gaps to address the structural bias women and minorities face regarding job opportunities and pay. BlackRock reports neither.
Racial and gender unadjusted median pay gaps are accepted as the valid way of measuring pay inequity by the United States Census Bureau, Department of Labor, OECD, and International Labor Organization. The United Kingdom and Ireland mandate disclosure of median pay gaps, and the United Kingdom is considering racial pay reporting.
An annual report adequate for investors to assess performance could integrate base, bonus, and equity compensation to calculate:
- percentage median and adjusted gender pay gap, globally and/or by country
- percentage median and adjusted racial/minority/ethnicity pay gap, U.S. and/or by country
To Enhance Shareholder Value, Vote FOR Pay Equity Disclosure – Proposal [4*]
[This line and any below, except footnotes, are not for publication]
Number 4* to be assigned by Company
 https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/promoting-gender-parity-in-the-global-workplace ; https://www.issgovernance.com/file/publications/ISS-ESG-Gender-Diversity-Linked-to-Success.pdf
Pay Equity Disclosure 2023: Sticking Point
Every company I have contacted readily admits they need to measure pay gaps. Regardless of those who attack #ESG as #wokecapitalism, companies are addressing decades of systemic racism and sexism. Or, at least they claim to be addressing the issues. Motivations vary but most acknowledge that greater diversity increases corporate performance, social cohesion, and democracy. Some companies are either so far behind the curve that disclosures would be very embarrassing or might even open them to lawsuits. Others insist these numbers are proprietary secrets or just no one’s business.
Most are willing to report adjusted pay gap analyses. Adjustments allow companies to report pay equity across job categories, seniority, geography, etc. and make corresponding wage adjustments. Adjustments allow them to show that often women and minorities are paid equitably for their current roles compared to their direct peers. But what if all the well-paying jobs are held by white men?
Unadjusted median pay is considered the valid way of measuring gender pay inequity by the United States Census Bureau, Department of Labor, OECD, and International Labor Organization. It is harder to fake.
- Black workers in the U.S. earn 64 cents on the dollar versus white workers.
- Women in the U.S. earn 83 cents on the dollar versus men on this basis.
- United Kingdom and Ireland-based companies are mandated to report median pay.
Pay Equity Disclosure 2023: Read More
Of course, those interested should first turn to Arjuna Capital’s Racial and Gender Pay Scorecard, reference above. Another excellent post is from Morningstar, Shareholders Step Up Voting Efforts on Racial Equity and their analysis of proxy voting. As Morningstar notes,
In the 2020 proxy year, the overwhelming majority of the 21 shareholder resolutions about race addressed issues within companies: pay, board and management composition, or workforce composition.
By 2022, not only were there twice as many proposals in total, but they addressed a much broader slate of issues affecting wider society beyond the workplace, particularly inequality in income, and access to capital and services. In short, shareholders are thinking more about the wider systemic impacts of race in the United States, not just who is on the payroll and how much they earn at any particular business.
The increase in shareholder resolutions requesting racial-equity and civil rights audits at U.S. companies in the past couple of years has been particularly noteworthy. In the 2021 and 2022 proxy years, they made up around one third of all shareholder proposals addressing racial equality.
By the 2022 proxy year, more than one in five key resolutions addressed racial equality themes, and these key resolutions have consistently been supported by a majority of independent shareholders at U.S. companies
There is clearly a long way to go in addressing racial equality within society, but it’s clear that the investment community is prepared to demand action from companies on this important issue.