In an era defined by the pursuit of ESG ideals, the challenge of achieving gender pay equality continues to loom large. The concept of providing equal compensation for equal work seems intrinsic to a just and inclusive society. However, the intricate web of factors woven into the gender pay gap reveals a sobering truth: achieving pay parity is a far more complex endeavor than it may initially appear.

THIS ARTICLE IS WRITTEN BY BRIAN JAMES AND MARLENE JANS. BRIAN ([email protected]) HAS A STRONG FOCUS ON GLOBAL EMPLOYMENT SERVICES AND MARLENE ([email protected]) HAS STRONG FOCUS ON CORPORATE GOVERNANCE & CULTURE WITHIN RSM NETHERLANDS BUSINSS CONSULTING SERVICES.

As far back as 1957, the European Treaties espoused the principle of equal pay for equal work. Yet, these well-intentioned commitments have struggled to translate into substantial change. Recent research by the European Commission exposes the harsh reality: the gender pay gap within the European Union (EU) remained stubbornly entrenched at 12.7% in 2021. This translates to women earning, on average, 13% less per hour than their male counterparts. 

The intricate layers of the gender pay gap extend beyond mere monetary discrimination. They encompass a broader landscape of inequalities that obstruct women's progress in the workforce. From sectoral segregation, where certain industries remain male-dominated, to the unequal distribution of paid and unpaid work and the notorious glass ceiling—these factors form the foundation of pay disparities. While a proportion of the pay gap can be attributed to factors like education, occupation, and working hours, a substantial chunk remains unexplained. This points to a dire need for greater transparency in remuneration policies to root out unjust gender-based pay disparities.

Case study

A recent high-profile case in the United States spotlighted the systemic underpayment of women. A leading US bank found itself embroiled in a lengthy legal battle, culminating in a landmark $215 million settlement. Nearly 2,800 female employees united against gender pay inequality, highlighting allegations of systematic bias in compensation and promotions. This case can be considered as a hard fought victory, but it also exemplifies the enduring struggle against the glass ceiling and the uphill battle women face in achieving equal pay for equal work. A step in the right direction is made in equal renumeration, yet the bank's partner composition remains imbalanced, with women comprising only 29% of the total. This underscores the complexity of achieving true Diversity, Equity, and Inclusion (DEI), pivotal components of the broader ESG framework. This case exemplifies the urgent need to establish transparent, unbiased remuneration policies to avoid unfair treatment of its employees, which also safeguards companies from reputational damage, financial penalties, and erosion of stakeholder trust.

Brussel’s answer

Responding to these challenges, the European Commission took a decisive step by introducing the Pay Transparency Directive (Directive 2019/1152) on April 24, 2023. This directive outlines measures aimed at fostering equal pay between women and men across member states. Nevertheless, the directive's applicability to situations involving international mobility remains shrouded in ambiguity. While it could be assumed that the directive's scope extends to intra-EU country cases, this hinges on a uniform implementation across member states—an assumption laden with uncertainty. Additionally, the directive's implications for non-EU employees assigned to work within the EU remain less than clear. For multinational corporations with a diverse workforce, the directive's intricacies must be deciphered to grasp its implications for employees on the move. Integrating these insights into international mobility frameworks serves as an initial step toward compliance. 

What can you do from a governance angle?

From a governance vantage point, the road to gender pay equality pivots on fostering transparency in compensation structures, DEI-initiatives, and career advancement. This isn't just about adhering to legal obligations; it's about projecting an image of an ESG-conscious employer committed to equity. Amidst the fierce competition for talent in today's job market, potential employees factor a company's ESG principles into their decision-making calculus. Neglecting these principles can have a detrimental impact on talent acquisition and retention over time. Harmonizing strategy with core values and a consistent code of conduct is paramount. Presenting a unified front, rather than sending mixed messages, is crucial to retaining employee commitment. Establishing clear Key Performance Indicators (KPIs) for responsible stakeholders, acknowledging milestones, and demonstrating steadfast dedication to gender equality are the cornerstones of progress.

The journey toward gender pay equality is marked by complexity and challenges. Yet, the imperative to rectify historical inequities is unequivocal. As society evolves and demands for fairness grow louder, companies must adapt to align with their values. In the grand tapestry of progress, the threads of gender pay equality must be woven with care, diligence, and an unwavering commitment to change.