Activist Investor Still Has Questions After Google’s Pay Equity Audit

Activist Investor Still Has Questions After Google’s Pay Equity Audit

Google announced last week that it had conducted an internal gender pay equity audit and found no statistically significant differences in pay between its male and female employees. The report, however, only covered 89 percent of the company’s global workforce of over 70,000 people, with Google saying it had excluded employees in groups on which it could not perform a rigorous statistical analysis:

Our analyses covered every job group with at least 30 Googlers total and at least five Googlers per demographic group for which we have data (e.g., at least five men and at least five women). These n-count minimums ensure statistical rigor (e.g., higher statistical power, narrower confidence intervals) and allowed us to include 89 percent of Googlers (n=63,153) from entry through executive levels. We did not find statistically significant pay differences for 62,925 Googlers, but did for 228 Googlers across six job groups. We therefore increased compensation for those 228 Googlers, totalling ~$270k USD, before finalizing compensation planning and paying any Googlers.

Like other recent pay equity audits at tech and finance companies, Google’s came in response to a shareholder proposal put forth by the activist fund Arjuna Capital. Yet because 11 percent of the Google community, including executives at the senior vice president level and above, were not accounted for in the study, the investment firm tells Bloomberg that it is unsatisfied with the report and will not withdraw its resolution as it has at other companies that completed gender pay audits:

“We find ourselves uncomfortable with its lack of breadth,” said Arjuna Managing Partner Natasha Lamb, adding that she was concerned about the 11 percent. “We think there is room for improvement and can’t give a rubber stamp to an incomplete analysis.” …

Lamb said she won’t drop her proposal, which asks the company to report on the risks it faces from emerging public policies on gender pay, “including reputational, competitive and operational risks, and risks related to recruiting and retaining female talent.”

Another number in Google’s announcement that has caught the eye of critics is the $270,000 it says it spent to close existing pay gaps. A relatively small sum for a company of Google’s size, the figure nonetheless suggests that its equal pay practices prior to this audit had been leaving some gaps in place, the MIT Technology Review infers:

Google has been analyzing its pay gap since 2012. In 2017, the company outlined how it calculates each employee’s salary. The last factor before wages are final is an adjustment based on gender. … Last year, Google reported that it found no pay gap for 2016 and that no modification was needed. (This was around the same time the US Labor Department accused Google of “extreme” gender pay discrimination.) That information makes this year’s $270,000 change even more of a curiosity.

An important finding that emerged in our recent research on pay equity at CEB, now Gartner, is that achieving pay equity is not a “one-and-done” process. Addressing pay equity issues through a series of ad hoc audits and adjustments consumes more resources and exposes organizations to greater risk of pay gaps re-emerging than if they found a way to address them continuously. If Google closed these gaps last year but found that they reappeared this year, that could be a sign that something in its compensation process is causing them.

Google’s pay equity claims come after the company has faced mounting scrutiny over its pay practices over the past year, including allegations from the US Department of Labor that it engaged in gender pay discrimination and a lawsuit by several former employees also claiming that the company systematically discriminated against women in pay and career development. Google has maintained throughout that its pay practices are fair with regard to gender.