CEO pay higher where more women are on company board

NEW YORK • Appointing more women to corporate boards has long been viewed as a good thing for a company's performance and for society as a whole. But gender diversity among directors carries another benefit, 2015 proxy filings in the US show: a bigger pay cheque for the company's CEO.

An analysis of CEO pay at 100 large companies last year by Equilar, a compensation research firm in California, found that companies with greater gender diversity on their boards paid their chief executives about 15 per cent more than the compensation dispensed by firms with less diverse boards.

In dollars, this translated to approximately US$2 million (S$2.7 million) more in median pay last year among these companies.

This data, which comes from a smaller set than Equilar's broader study of pay at the top 200 companies, does not necessarily prove cause and effect. There could be other reasons for the disparity, too. The more diverse companies could be bigger or more profitable than average, for example.

Ms Nell Minow, a long-time expert on corporate governance, was not surprised by the findings.

"It's very difficult for women to get on boards, and I think they are under even more pressure to go along and get along," said Ms Minow, a vice-chairman at Value Edge Advisors, a consulting firm that works with shareholder groups on compensation and other issues. "The culture of the boardroom is to vote yes. You want to stay on the board, don't you?"

If Ms Minow is right about boardroom culture, anyone arguing for more women on boards should recognise that gender alone may not be enough to generate a new approach to compensation.

Roughly one in five directors at a wide array of public companies is a woman, Equilar said. That is up 31 per cent over the last five years. Among the 100 largest companies Equilar studied, 57 per cent have boards where women make up more than a fifth of the members, which is the average share of female directors among Standard & Poor's 500 corporations.

The median pay among the chief executives overseeing the companies whose boards had more gender diversity was US$15.7 million last year, Equilar found. This compares with US$13.6 million received by heads of companies whose boards had 20 per cent or fewer women.

Chief executive compensation at companies with more diverse boards also exceeded by 8 per cent the US$14.5 million median pay received by CEOs employed at the top 100 companies.

At the 10 large US company boards with the greatest gender diversity, 46 of the 124 directors were women. That is more than a third.

Macy's, the giant retailer, topped this list with six female directors out of 13. Wells Fargo came second with 40 per cent of its board consisting of women. Procter & Gamble and Hewlett- Packard each had boards made up of 38.5 per cent women.

At Abbott Laboratories and Cardinal Health, female directors accounted for 36.4 per cent of the boards. At the remaining companies - Accenture, AT&T, ManpowerGroup and Tenet Healthcare - one-third of the board members were women. At Twenty-First Century Fox, just 7.7 per cent of its board comprised women.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on May 31, 2016, with the headline 'CEO pay higher where more women are on company board'. Print Edition | Subscribe