16 July 2007

Men make more money than women

Some of my women executive friends complain that they don’t get paid as well as their male counterparts do. They say that women aren’t good negotiators of (their own) compensation packages during job interviews because they lack the aggression men have. In the process, they compromise on their earnings while putting in the same effort at work.

This thought is perhaps true as (besides also being suggested by a fellow blogger in a recent comment on my blog) it seems to resonate faithfully in the largest of the ‘equal employment opportunity’ markets in the world: the United States of America.

Almost a year ago, an article in CNNMoney.com commented on this very fact. The article, by Jessica Seid, titled ‘10 Best-paid executives: They are all men’, presented a case of how, according to data collected from compensation surveys done in 2005 for Fortune magazine, the best-paid women executives in the US were paid almost a third of what the best-paid male executives received.

Here are some examples from that article:

In 2005, the top-earning woman executive was Safra Catz, president and CFO of Oracle. She took home $26.1 million in total compensation. Her CEO, Larry Ellison, took home $52.3 million (double of Catz’ pay).

The second-highest paid woman executive, Susan Decker, CFO of Yahoo!, made $24.3 million. Her chairman and CEO, Terry Semel, earned $56.8 million (more than double of Decker’s earnings).

Compared to the two best-paid women executives, Catz and Decker, the highest paid executive in the US in 2005 was Eugene Isenberg, CEO of Nabors Industries, taking home $71.4 million. The next was Ray Irani, CEO of Occidental Petroleum, who made $70 million.

Why is there such a striking difference in the compensations of top women and men executives? According to the CNNMoney.com article:

“All through the pipeline women leaders aren’t paid as well as men,” said Lois Joy, research director at Catalyst, a nonprofit that seeks to advance women in business. “And when you get to the CEO level, that same inequality is replicated.”

Indeed, the earnings of women in full-time management and professional jobs last year averaged 73 percent of men’s, according to the Bureau of Labor Statistics. That gap can be explained to a large extent by nondiscriminatory factors, some studies have found, and are based on a division of labor in the home that relies more heavily on women than on men, according to Catalyst.

Women are not only less likely to work continuously during their lives, but responsibilities at home also influence their choice of job and type of employer, Catalyst said.

However, top-ranking woman executive Safra Catz’ pay was almost a third of top-ranking male executive Eugene Isenberg’s… a figure far less than the 73 percent difference the US Bureau of Labor Statistics reported. Did this mean the difference in compensation packages between women and men increases as the executives move up the corporate ladder?

The CNNMoney.com article suggested one reason (among a few) for this:

At lower levels, a lot of the disparity between executive men and women’s paychecks can be explained by the fact that women managed smaller companies and were less likely to be CEO, chair or company president, said Kevin Murphy, a professor at USC’s Marshall School of Business citing a paper by Marianne Bertrand & Kevin Hallock.

In fact, eight out of 10 of the highest-paid executives overall are CEOs, while only five of the 10 best-compensated women are chief executives.

It doesn’t sound like a very convincing premise to me, but there you have it. Whether you agree with it or not, reading the CNNMoney.com article might give you a better understanding – at least, an US perspective – of the differences in compensations between the two genders.

You can find the CNNMoney.com Jessica Seid article here.

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