The Gender Pay Gap Shrinks in the Sun

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Men and women in a large conference room, business setting

There’s a new article in Harvard Business Review that, as its title says, reports that gender pay gaps shrink when companies are required to disclose them.1 This is yet another demonstration that sunshine is a powerful disinfectant. By now, we shouldn’t need another demo, but the persistence of the pay gap indicates that maybe we do.

In brief, the researchers found that companies required to report on pay by gender, as a consequence of a 2006 law in Denmark, did shrink their pay gaps by 7 percent compared to the control group, whose pay gap remained static. That narrowed gap came from slowed pay increases for males, interestingly.

While there were some costs — at least an initial dip in productivity — by the end of the study period that decline had been fully offset by the costs saved from not raising men’s wages to the same extent as the control group. And there was no impact on firms’ net income as a result of the mandate. Pay transparency was the moving spirit behind another good thing that happened in the Danish study: Companies required to report pay gaps also hired more women in the intermediate and lower hierarchy levels.

So much for the fear factor. The authors note that the law had been “significantly watered down from its original” due to industry concerns. That’s not a surprise; it’s common, perhaps even typical, for any proposal for increased transparency or regulation of activity to be greeted by predictions of doom: “If you make us do this, we won’t be competitive. Our jobs will all move to Sri Lanka.” Those Chicken Little scenarios almost never materialize. Great Britain recently mandated gender pay reporting for larger companies, and while the nation’s economy may be headed for trouble, it’s because of Brexit, not reporting on pay gaps.

“The pay gap, itself, can be quite costly.”


However, the pay gap, itself, can be quite costly, as this very recent news demonstrates: The Department of Labor determined that Oracle Corp. has systematically discriminated against women, black and Asian workers, and owes those workers $400 million in back pay.2 We have filed shareholder resolutions at Oracle for the past two years, requesting that the company conduct a pay audit by gender and report the results to shareholders. While that proposal has not garnered a majority vote from shareholders, it did receive favorable votes from the majority of shareholders who voted and who aren’t Larry Ellison, who owns about 30 percent of Oracle’s stock.

Sunshine is indeed a powerful disinfectant. If you have a choice between showing up in an unfavorable headline like Oracle’s, and maybe paying $400 million in back wages on top of that, or doing a pay audit, is there seriously any room for debate? Hmm…. no.

1Harvard Business Review, “Research: Gender Pay Gaps Shrink When Companies Are Required To Disclose Them,” Jan. 23, 2019.
2Bloomberg Law, “Oracle Owes $400M to Women, Black, Asian Workers, DOL Says,” Jan. 22, 2019.

Did you know?

Pax World Funds has filed or co-filed shareholder resolutions about pay equity at 15 companies, requesting the disclosure of the results of pay equity assessments. So far, 13 companies have made public commitments to pay equity including Apple, eBay and Amazon. Learn more

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Julie Gorte, Ph.D.
Julie Gorte, Ph.D.
Julie Gorte, Ph.D. is Senior Vice President for Sustainable Investing and oversees environmental, social and governance-related research on prospective and current investments as well as the firm’s shareholder engagement and public policy advocacy. Julie is also a member of the Impax Gender Analytics team. Prior to joining Pax, Julie served as Vice President and Chief Social Investment Strategist at Calvert. Her experience before she joined the investment world in 1999 includes nearly 14 years as Senior Associate and Project Director at the Congressional Office of Technology Assessment, Vice President for Economic and Environmental Research at The Wilderness Society, Program Manager for Technology Programs in the Environmental Protection Agency’s policy office and Senior Associate at the Northeast-Midwest Institute. She received her Bachelor of Science in Forest Management at Northern Arizona University and a Master of Science and Ph.D. from Michigan State in resource economics.