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.
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.
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