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It’s no secret that most companies, especially those that are public, are increasing their efforts to achieve workplace equity. Whether it’s through tying diversity, equity and inclusion (DEI) initiatives to executive compensation, improving employee well-being or simply ensuring that all employees are compensated fairly across race, gender and ethnicity — a positive shift is no doubt underway.
WorldatWork’s Workplace Equity Virtual Forum May 19-20 explored all of these areas, including how HR and total rewards pros should approach the board and investors about the topic of pay equity.
In their session, “Getting Boards and Investors on Board with Pay Equity,” Semler Brossy Consulting Group’s Deborah Beckmann, managing director, and Blair Jones, managing director, took attendees through the evolution of pay equity as a compliance-driven topic to a focus for internal and external stakeholders.
Jones noted that even as recent as a few years ago, boards of directors viewed pay equity as a risk-management issue and were mired in uncertainty as it related to the appropriate way to both identify and rectify inequities that might exist.
Beckmann, who was previously the global head of human capital management employee experience at Goldman Sachs, said finding the best way to communicate the issue of pay equity to the board of directors is a hurdle in itself.
“One of the hardest issues is how do you present this in a way so it’s thorough while doing so in a summary way, so they really understand the current situation and where we were beforehand and where we’re going,” Beckmann said. “So, it’s about summarizing these multi-year trends so that they have a good handle on where we are and a good handle on the programs we have in place to advance that.”
In the session, Jones and Beckmann outlined where the situation stands as of today. Boards are interested in understanding the employee experience, which includes pay equity, in the context of the broader discussion on culture and employer brand. They are also interested in reputational and legal risk as well as stakeholder capitalism. Investors, meanwhile, are increasingly investing in companies that are aligned with the institution’s values related to equitable treatment. They are typically focused on risk mitigation while recognizing that human capital and culture are key drivers of long-term success for organizations.
As far as what board members want to know on the topic of pay equity, Jones and Beckmann identified these key questions:
- What analysis have we done?
- What have we found?
- How are we remediating issues?
- What are our long-term solutions?
- How will we be kept informed of ongoing analysis strategies?
- What do we know about how we might compare to peers?
- What are we communicating to our company and externally?
- How are our broader DEI efforts supporting the outcomes?
“The board gets comfort if there’s a little bit more rather than a little bit less,” Jones said. “If they can get a sense that there is an ongoing process to look at these things and it’s going deeply and it’s driving real insights, that’s helpful to them.”
Jones added that in the early stages of pay equity analysis, boards were just receiving high-level data about the pay gap. Now, she noted, the process is more refined and broken down across global workforces by different populations within people of color and by level within the organization. This process can become convoluted for multinational companies when attempting to analyze data by individual countries.
“When you’re looking at the demographics at the company, depending on the location, it should ideally align with the broader demographics of the country [where] you’re located,” Beckmann said. “If you’re in multi-jurisdictions, it does become a little complex, but it’s an important aspect. Within that, you’re thinking about that at the entry level, but also while you’re moving up the chain whether you have that representation breakdown at the most senior level.”
Human Capital Management
Beckmann and Jones highlighted the fact that the topic of pay equity is now an important component of broader human capital management discussions and reviewed alongside other measurements like headcount, turnover and representation.
Some examples of what data is used when presenting the overall pay equity analysis to the board are:
- Total employee population
- Gender representation
- Ethnic demographics
- Generation demographics
- Promotional data
- Market data
- Median pay by gender and race
Beckmann said that organizations are also polling their employees more frequently about the organizational culture and their employee experience to track potential human capital trends, which are also shared with the board.
All of the data, of course, must be presented in a strategic manner to achieve maximum effect.
“I’m finding from a best practices standpoint that companies are putting these dashboards at the beginning of their HR committee materials so the CHRO or CEO can comment on what’s going on in the trends,” Jones said. “Alternatively, they might put it in the back of materials as a reference. The idea is to keep the human capital measures front and center because it puts a context for the all the other discussions you’re going to have with the committee or the board.”
Ultimately, the trend of including human capital data when assessing company performance is not slowing down. The Securities and Exchange Commission’s new 10-K human capital disclosure rule broadens what public companies must include in their annual reports. Previously, the SEC just required companies to report staff size and executive compensation. Additionally, Jones noted that more companies are releasing “robust disclosures” on diversity and inclusion and talent management in their corporate social responsibility reports.
“We should expect more of this as we go forward,” Jones said, “and pay equity is one piece in the equation.”
About the Author
Brett Christie is the managing editor of Workspan Daily.