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:
Trillium Asset Management, an activist investment fund focused on social and environmental responsibility, has filed a shareholder proposal at Verizon that would tie executive compensation at the telecommunications giant to its performance against cybersecurity and data privacy goals:
Verizon shareholders request the appropriate board committee(s) publish a report (at reasonable expense, within a reasonable time, and omitting confidential or propriety information) assessing the feasibility of integrating cyber security and data privacy metrics into the performance measures of senior executives under the company’s compensation incentive plans. …
Currently, Verizon links senior executive compensation to diversity metrics and carbon intensity metrics. Cyber security and data privacy are vitally important issues for Verizon and should be integrated as appropriate into senior executive compensation as we believe it would incentivize leadership to reduce needless risk, enhance financial performance, and increase accountability.
The proposal points to several data breaches in the company’s recent history, including one that affected 1.5 million customers in 2016 and another affecting 6 million last year. It also expresses concern about the growing number of users whose data the company is now responsible for safeguarding following its acquisition of Yahoo and AOL, which will expand Verizon’s digital advertising reach to 2 billion people.
American Express has joined the ranks of major US financial firms pledging to identify and close gender-based pay disparities within their workforce in response to pressure from the activist investor Arjuna Capital. On Wednesday, the credit card company told employees that its most recent pay analysis, conducting with a third-party consultant, “found no evidence of bias in our compensation processes and indicated we were effectively at parity,” Bloomberg reports. The company also told Arjuna that it would report any findings on pay disparities to its shareholders by the end of 2018:
“Women are still 20 percent more likely to leave a career in finance than any other industry — that’s bad for business and it’s bad for investors,” said Arjuna Capital managing partner Natasha Lamb, who filed a shareholder proposal seeking the pay disclosure at American Express and eight other companies this year. Calling equal pay “a critical first step” to retaining top talent, Arjuna withdrew its proposal in response to AmEx’s pledge.
In her withdrawal letter, Lamb said AmEx’s review will include base, bonus and equity compensation, and the company will adjust pay to get to 100 percent equality. It will also disclose its methodology, according to Lamb.
Bloomberg has compiled data showing that women make up 50 percent of American Express’s workforce but just 30 percent of its management.
At the Harvard Law School Forum on Corporate Governance and Financial Regulation, Institutional Shareholder Services Executive Director Subodh Mishra recently published a summary of an ISS analysis of 450 proposals filed at Russell 3000 companies, which shows how investors’ priorities are shifting toward social, political, and environmental concerns. More than two thirds of these proposals are related to social or environmental issues, chief among them political activity and spending, board and workplace diversity, and climate change and sustainability, Mishra writes. Furthermore, nine of the ten most common types of proposals related to one of these issues, whereas only one (demanding the right to call a special shareholder meeting) is focused on governance. Mishra sees two main factors driving this trend:
First, social and environmental issues themselves are gaining significant traction with investors and the public. Important issues, such as concerns about the transparency of the political process, harassment and equity in the workplace, and climate change risks make headlines and dominate the public discussion daily. At the same time, investors and asset owners are bolstering their efforts towards greater ESG integration, which helps proponents gain further momentum. Second, governance topics may be lower on the agenda for the target universe. Shareholder proposals are typically filed at large-capitalization companies, where many formerly-contested governance issues have now become the standard. Annual director elections, majority vote standard, simple majority vote requirements and even proxy access—to a large extent—are now the norm for the vast majority of large companies.
ISS’s analysis counts proposals related to diversity and inclusion toward its total of “social issue” resolutions; while that’s fair, investors are paying more attention to diversity not only out of a sense of social responsibility but also as part of the investor community’s growing concern with talent as a key driver of business value.
Last autumn, the Boston-based investment firm Zevin Asset Management led a investor push at Starbucks to pressure the coffee chain into expanding its parental leave benefits for hourly store employees to match the more generous policy available to salaried corporate employees. In a shareholder resolution, Zevin requested that Starbucks’ leadership tell its investors whether this discrepancy might constitute employment discrimination.
In January, Starbucks announced that it was expanding its parental leave benefits, as well as adding paid sick leave, for hourly employees. While the changes do not equalize the offerings for salaried and hourly employees, they will make parental leave available to many store employees who were not able to take it before. Zevin considered that a victory, and they and other activist investors have since been pushing for similar changes at other large US employers, Rebecca Gale reports at Slate:
The Starbucks shareholder resolution on paid family leave was the first of its kind, and it has proven so effective that socially responsible investing firms such as Zevin are gearing up to put more shareholder resolutions in place for companies that have unequal paid leave policies, citing the need for what they call “better human capital management,” i.e. better meeting the needs of workers, which they think will yield better long-term results for the companies. And Zevin has the close-knit group of socially responsible investment firms in Boston that regularly meet to learn about issues and connect on ideas to make it happen.
In 2016, a study from Arizona State University found that female CEOs were significantly more likely than their male peers to be targeted by activist investors. A new study by University of Alabama management professors Vishal K. Gupta and Sandra Mortal and the University of Missouri’s Daniel B. Turban comes to the same conclusion. The authors present their findings at the Harvard Business Review:
To test this, we analyzed data from 3,026 large U.S. firms between 1996 and 2013. We identified activist investor activity by looking at Securities and Exchange Commission (SEC) records. Shareholders who acquire more than 5% of the voting stock of a public company with the intention of influencing management are required by the SEC to file a Schedule 13D form. We found over 1,500 13D filings for 1,090 firms in our sample. …
We found that firms in our sample led by male CEOs were targeted by an activist 6% of the time during the study period, versus 9.4% when the CEO was female. Wolf pack attacks occurred for male and female CEOs at 1% and 1.6%, respectively. Even though these differences appear small, this means that firms with female CEOs were 50% more likely to be targeted by activists and approximately 60% more likely to be targeted by multiple activists.
The authors had hypothesized that investors were susceptible to gender role stereotypes that associate men with stronger leadership skills, and thus would be more inclined to scrutinize the actions of female CEOs, whom they either consciously or unconsciously believed to be less competent:
Citicorp Headquarters (Felix Lipov/Shutterstock.com)
In response to pressure from activist investors, Citigroup recently conducted a pay survey of its workforce in the US, UK, and Germany, which found very small (1%) pay gaps based on gender and race. In response to these findings, the company announced on Monday that it would adjust salaries to close these gaps, becoming the first major US financial institution to do so, Reuters reports:
On average, Citi found, women and minorities are paid 99 percent of what men and non-minorities are paid, respectively. Compensation would be raised based on the pay gaps identified in the survey, Citi spokeswoman Jennifer Lowney said. …
[Activist investor Arjuna Capital] asked Citi’s shareholders last year to vote in favor of a proposal requiring the bank to address the gender pay gap. But on Monday, Arjuna withdrew that proposal, saying that Citi’s announcement represented a major shift for U.S. banks and credit card companies.
Arjuna Capital, the activist arm of investment firm Baldwin Brothers Inc, has been using shareholder resolutions to push for action to address gender pay gaps at a number of large US companies, including other big names in finance and tech. Last year, Arjuna succeeded at pressuring Amazon into conducting a pay gap study, which found that women earned 99.9 cents for every dollar that men earned in the same jobs.