working women

Why Women Should Ask for More Incentive Pay!

A rising tide lifts all boats.  We all “know” that when a company does well, executive compensation rises.  Similarly, when a company performs poorly, executive pay is penalized.  When it comes to gender, however, things are not this straightforward.

A recent paper by the Federal Reserve Bank of New York studied the compensation of female and male executives with the following titles: Chairman, Vice Chairman, CEO, COO and Presidents.  The authors found that 93% of the difference between what men and women executives earn could be explained by the incentive portion of their compensation.  In other words, the cash bonuses, stock and options tied to reaching company performance tended to be larger portions of a male executive’s total compensation package.  But its not just that women get less incentive comp.  Even when she does receive these sorts of incentive payments, a female executive benefits far less than her male counterpart when their company performs well.  As this Bloomberg article puts in graphical terms, she only gets 1/10th the benefit a male executive does.  And the real stinger is that when a company performs badly, the female executive’s pay is hit almost 2x as much as the male exec.

Was this because women-led companies performed worse than male-led companies?  The authors looked at this possibility and found no real difference in performance by gender.  What they do suggest as possible reasons are the same anecdotes we tend to hear on the topic, i.e. weaker networks of support and advocates, and calcified pay gaps that start early and continue even into the C-suite.

To us, the silver lining of this study is that there’s an actionable “to do”.  If you’re one of the fortunate women who actually is in a position to receive incentive compensation, ask for it — and ask for a lot of it!   While its never easy to ask for more pay, its probably easier to do it if you tie your request to performance targets since this request will be, by definition, justified by something concrete.  Even if you’re not in the C-suite, you can ask for your bonus to be tied to the company or department’s performance.  While the study didn’t study other positions within a company, its probably not far-fetched to think this pay gap in incentive pay is prevalent for other job titles.

The full NY Fed study can be found here (Warning: its quite academic and dense.)

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