Employers are failing to address pay gaps that threaten women and people of color not only today but also in retirement. Among the 57 companies examined in the “Racial and Gender Pay Scorecard” released on March 15 to mark Equal Pay Day, only seven — Pfizer, Mastercard, Bank of New York Mellon, Starbucks, Adobe, American Express, and Citigroup — earned an “A.” More than 40% (24 companies) received an “F.”
The fifth edition of the Scorecard, released by investment management firm Arjuna Capital and shareholder advocacy firm Proxy Impact, compiled quantitative data on the companies’ pay equity disclosures. Companies were graded across five categories: racial pay gap, gender pay gap, pay gap in the U.K., coverage and commitment. Investors have engaged all 57 companies through shareholder proposals, asking them to improve their public pay-equity disclosure.
The Scorecard “seeks to educate companies, investors, and the public to improve understanding of the racial and gender pay equity landscape,” notes the report.
“The pandemic has been a one-two punch for women and people of color who disproportionately suffered from the 2020 job losses. It’s no surprise that racial and gender pay equity has become a key area of focus for investors, who are demanding more from companies,” Natasha Lamb, managing partner at Arjuna Capital and the lead author on the report, said in a press release.
Last week, nearly 60% of shareholders voted in favor of an investor proposal asking Disney to disclose racial and gender pay gaps, she noted.
Lifetime-Earnings Disparities Can Approach $1 Million
“Pay inequality impacts retirees both directly and indirectly,” Michael Passoff, CEO of Proxy Impact and co-author of the Scorecard report, told Rethinking65. “Unequal pay leaves women and people of color with often significantly less for retirement.”
“The U.S. Census Bureau estimated that in 2020, women working full time earned 83% the wages of their male peers, a $10,435 per year gap. This can add up to nearly half a million dollars over the course of a career,” he said.
For Black and Latina women, the career earnings gap is close to $1 million, with Black women earning 64% and Latina women earning 57% of that of White, non-Hispanic males, the Scorecard noted.
“And collectively, equal pay and equal opportunity for women and minorities would add trillions of dollars to the economy and tax base which supports Social Security and Medicare,” said Passoff. The report cites related data from Citigroup and McKinsey.
However, women will not reach pay parity until 2059, while Black women will have to wait until 2133, and Latina women until 2206, the Scorecard report noted.
The Full Picture
Why include U.K. data? The Scorecard wants U.S. companies to follow that model, said Passoff. The U.K. requires adjusted pay (which looks at equal pay for equal work) and unadjusted median pay gaps (which looks at equal opportunity). “You need both to overcome a pay gap,” he said, yet most U.S. companies only provide adjusted data which lets them “cherry pick” the information they provide. “Unadjusted data is less flattering, so they want to hide it,” he said. “But you need both to get a full picture of a company.”
“For example, many companies will provide equal pay at the lower levels, but if you don’t have the opportunity to move up through the company, you can never reach a higher paying job,” he said. “Women and people of color are almost always deeply underrepresented in higher-paying positions.”
Over the past eight years, at least 80 companies have faced 143 shareholder resolutions on their gender- and racial-pay gaps, and many more shareholder dialogues have occurred without the need of a shareholder resolution, the report noted. This year, nine resolutions asking for gender and racial median-pay reports have been filed as of March 10.
“Studies show that companies that disclose pay gaps are more likely to fix them,” said Passoff. “Forward-thinking companies are recognizing that median pay-gap reporting will eventually be the norm and they are getting ahead of it now.”