This piece was originally published on WomenEffect.com, an independent knowledge hub about gender lens investing. Women Effect’s content is now part of the Wharton Social Impact Initiative. Read more about the transition here.
Investors can play a role in getting top companies to commit to fair pay, says Natasha Lamb, Managing Partner at Arjuna Capital.
Research tells us that having more women in the top ranks of corporate America is a good thing. Gender diverse teams lead to greater profitability, return on equity, stock price performance, and innovation—key performance measures for any company.
As such, structural biases that keep women from advancing into leadership positions, including the gender pay gap, are significant barriers to outperformance.
Yet the gap persists—women continue to make 79 cents on the dollar, as compared to men—a shortfall not expected to close for another 40 years. That is, at the current rate of change.
Thankfully, bigger change is in the air. Over the last year, the outcry, action and momentum to close the gender wage gap has escalated and investors have successfully pressed top companies to commit to fair pay. California and Massachusetts have passed the strongest equal pay laws to date. The Paycheck Fairness Act continues to pend at the federal level, and over the last several months, more than 50 companies have signed the White House Equal Pay Pledge. All this in nine months!
Shareholder Proposals To Challenge Big Tech
Recognizing the business case for building and maintaining a robust pipeline of female talent, Arjuna Capital filed the first shareholder proposals on equal pay with Big Tech companies beginning in 2014. Arjuna focused on the tech sector, which has a reputation as a boy’s club, because its female talent gap is simply bad for business. Innovation is job one in Silicon Valley and gender diverse leadership teams create more innovation.
And the tech industry has heeded the call. Beginning this February, seven of the nine companies where proposals were filed —Apple, Intel, Expedia, Amazon, Adobe, Microsoft, and eBay— have committed to publicly disclose and close their pay gaps. Only Facebook and Alphabet have been opaque in their disclosures.
But Arjuna is not the only investor calling for change—other shareholders are lending increasing support. Arjuna’s equal pay proposal at eBay garnered a majority vote at the annual meeting this spring, up six-fold from the prior year’s result, prompting eBay’s CEO to commit to “fix the problem.”
Working Together To Fix The Pipeline
Companies are beginning to recognize the case for gender equality and take steps to remedy it: 75% of CEOs now rank it as a top priority. But while we’re headed in the right direction, women continue to face deep structural biases. Just last week, McKinsey and Company revealed that women are 30% less likely to be promoted than men at the early stages of their career. With these odds, it’s no surprise that women only account for 17% of the C-Suite – the pipeline is broken at the start.
Achieving gender equality will require systemic change on all levels—corporate, investor, regulatory, and societal. Addressing the unconscious bias, outright discrimination, and structural barriers that keep women and business from reaching their full potential will take work. There is no panacea.
As investors, we will to continue to press the companies we invest in to take the lead, whether in the tech sector, financial services industry, or other male dominated fields. For in the absence of corporate change, women will continue to hit that glass ceiling. But with corporate transparency and accountability working to break down the barriers, women can give leadership a real crack.
Natasha Lamb is Managing Partner, Director of Equity Research & Shareholder Engagement at Arjuna Capital. Natasha integrates Environmental, Social, and Governance (ESG) factors into Arjuna’s investment process while engaging major corporations to improve their performance through shareholder advocacy. Her 2014 landmark negotiation with Exxon Mobil led to the company’s first public report on global warming and carbon asset risk. She teaches sustainable investing at Pinchot University and holds an M.B.A in Sustainable Business from Pinchot. Natasha received her B.A. cum laude from Mount Holyoke College.