Gender pay and leadership gaps are real — and impact our economy

Yet more than 160 years after Seneca Falls, women still lag men in pay and business leadership positions in the United States. In testimony this week at a Joint Economic Committee hearing on the gender pay gap, I outlined the current landscape of workplace inequity.  

It isn’t pretty. 

Catalyst’s report, Pipeline’s Broken Promise, surveyed more than 4,100 women and men M.B.A. alumni from 26 top business schools worldwide — including 12 from leading U.S. universities. We discovered that women averaged $4,600 less in their initial jobs out of business school, even after controlling for job level, years of pre-M.B.A. work experience, industry, region, and time since earning the M.B.A.

Catalyst found that women started at lower levels than men after controlling for career aspirations and parenthood status. And women were outpaced by men in salary throughout their careers — regardless of whether or not they had kids. This gap in pay only intensified as time went on.  

If our “best and brightest” women face these challenges, can you imagine what’s happening throughout the rest of the system? A look at women leadership in America’s top companies and the picture darkens. 

For more than a decade, Catalyst has meticulously counted the number of women in leadership in Fortune 500 companies. The Fortune 500 is important because the country’s most powerful and influential companies set the standard. While women are currently 46.4 percent of total Fortune 500 employees, they are only 13.5 percent of Executive Officers, hold 15.2 percent of board seats, and are just 2.6 percent of CEOs. That means that of 500 CEOs, only 13 are women and 487 are men. 

The recently released Government Accountability Office (GAO) report on the pay gap for women in management — also unveiled at this week’s Joint Economic Committee hearing — found that female managers earn just 81 cents for every dollar male managers are making. The report also described a leadership gap that cuts across industries. One might expect female-prevalent industries like retail or finance would have high representations of women in leadership — but they do not. This is despite the fact that women have been outpacing men with Bachelor’s and Master’s degrees since the 1980s.

The Catalyst Census of F500 companies and the new GAO report reveal the extent to which our nation’s top companies are not meritocracies. When an organization values women and men equally, the gender balance should be the same at all levels — top and bottom. When it’s not, ingrained biases are halting progress for half of the talent pool. 

Catalyst research reveals how a “think-leader-think-male” mindset dominates talent management systems in corporate America. Traits and behaviors that organizations seek in their future leadership pipeline are too often modeled on current incumbents who are overwhelmingly male. And women are still penalized for behaving in ways that men are rewarded for. I call this the Goldilocks syndrome: “Too tough, too soft, but never just right.”

Why should we care?  Because promoting women to leadership and paying them equitably is not only the right thing to do. It’s the smart thing to do.

When a woman’s career is stifled, family income takes a hit. That’s less money for essentials like food, clothing, and doctor’s visits — let alone things like flat-screen TVs, SUVs, and trips to Disneyland. The ripple effect on our economy is enormous. 

Furthermore, Catalyst’s Bottom Line research found that Fortune 500 companies with more women corporate officers, on average, financially outperformed those with fewer. The same holds true when more women are in the boardroom. On average, companies with more women on their corporate boards outperform those with fewer by 53 percent on Return on Equity, 42 percent on Return on Sales, and 66 percent on Return on Invested Capital. Shareholders look twice at this kind of performance! 

Our research also shows that women aspire to success just as much as men do, and they define it similarly. But women are still paid less and are forced to navigate a corporate culture that holds women to different standards and makes it tougher for them to succeed. 

To break down these barriers, Catalyst advises companies to root out unintended stereotyping and establish strict accountability regarding promotion and compensation equity. “Sunlight is said to be the best of disinfectants,” wrote Louis Brandeis. When it comes to exposing pay inequity, I couldn’t agree more.  

Sunlight is starting to hit public companies and mutual funds. A new U.S. Securities and Exchange Commission (SEC) rule mandates that they must disclose in their proxy statements whether or not diversity is a consideration when directors are named. If these companies consider diversity during appointment proceedings, the SEC requires disclosure of how this policy is implemented, and how the board (or nominating committees) evaluates the effectiveness of this diversity policy.  

This federal response is an important first step. Another bold move forward would be for the Senate to join the House in passing the Paycheck Fairness Act. This law mandates, among other things, increased transparency on compensation. 

Too much is at stake to ignore the problem of gender inequity. Our economic health will continue to take a hit as long as “injuries and usurpations” of pay and promotions — in the words of 19th century trailblazers — persist.

Ilene H. Lang is president and chief executive officer of Catalyst. Founded in 1962, Catalyst is the leading nonprofit working globally to advance women and business.