Governance Watch - Issue 31

by Dina Medland in London

Gender Pay Gap

It was quite dramatic in the way it was reported in the UK media, but it came as no surprise. As the midnight deadline – set eight years after the law was tabled to compel companies across the country to reveal the extent of the difference between what men and women are paid – came and went, we learnt that women are paid a median hourly rate that is on average 9.7% less than that given to male colleagues. 

Another way of looking at it is in this report by the BBC: “78% pay men more than women, 14% pay women more and 8% said they had no gender pay gap, based on the median measure.”

This was an unsurpassed data gathering exercise that sets an important precedent on transparency, as companies will have to provide this information every year. The UK is one of the first countries in the world to implement mandatory gender pay gap reporting for companies with more than 250 employees. 

But the real importance of the law lies in the fact that it is not about pay at all, but about inequality of opportunity and its impact on economic growth and productivity. As such, it should really extend beyond gender differences alone.

The industries with the largest gender pay gaps have been revealed to be construction, finance and insurance, and education. If you think about that in terms of what each of those sectors does, it’s a powerful statement on the male-dominated culture of a country. 

Financial services among worst for UK gender pay gap: sector comes a close second to construction industry read the Financial Times headline. Gender pay gap among top 30 contractors revealed reported the Construction Enquirer.

Not only has mandatory gender pay gap reporting for UK business generated a lot of media coverage, it has also stirred up a lot of emotion. With the reporting deadline in the UK coming so soon after the #MeToo and #TimesUp women’s rights awareness movements across the globe (covered previously here in Governance Watch) and its implications for company reputation, it should be high on the agenda of many boardrooms, particularly those who chose to report at the very last minute. 

It’s another good reason for the Human Resources function to be sitting at that table – see my post last year on my blog Board Talk - and for recognition that gender equality is firmly an issues of corporate governance.

But there’s a danger too, that lies in any such mandatory change with the capacity to get people excited: the danger of missing the point entirely. Not in the mainstream media but in a blog for the London School of Economics, Louise Dalingwater looks at the nitty-gritty of the issues behind the lack of economic opportunity for women that is reflected in their paid work. 

This is not intended to argue that businesses need not concern themselves with next year’s snapshot of how they pay by gender. But she does point out that Mandatory Pay reporting may “also lead companies to regrade or re-title jobs that are occupied by men to justify pay gaps. This is indeed what happened after the introduction of the Equal Pay Act of 1970.”

The real problem is, as she points out: “Such reporting does not address the part-time pay gap because companies are not obliged to submit information on part-timers. And yet, the United Kingdom has the third highest incidence of female part-time workers in the OECD.”

Delving into the detail does not mean that it can be dismissed (as it often is) as a “societal issue.” Ms Dalingwater’s blog for the LSE offers ideas on urgent solutions at a time when the UK has “the fifth largest gender gap in Europe and the biggest increase in the pay gap this year.”

I would also argue that how businesses initially recruit people, how they define their jobs and then how they treat them and train them and promote them as employees is reflected in the level at which they work, and how they are paid – and that is regardless not only of gender, but also of race or ethnicity. As such, changing business culture in the UK may require a deep re-thinking on recruitment at a time when business models and necessary skills are changing rapidly in the face of technological transformation.

There’s an interesting initiative in just that direction by the Energy and Utility Skills Partnership that is fuelled both by the acute skills shortages and a commitment to inclusion. I covered it, and their Talent Source Network just the other day on Board Talk. 

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