Last spring Equilar, an executive compensation firm, released a headline-grabbing study on gender and CEO pay. In a survey of 341 S&P 500 companies, it found that the 17 female chief executives in the group made nearly $8 million more on average than their 324 male counterparts. Some in the media responded with shock and excitement (Fortune called it, for example, “a reverse gender gap”), while others cautioned about the report’s small sample size. But these findings are supported by two rigorous academic studies: One found that women who hold, or are likely to hold, senior management positions earn up to 10% more than their male peers. Another found not only that female CEOs are paid more than male CEOs but also that nonwhite CEOs (African-American, Asian, Hispanic, and Native American ethnicities) are paid more than white CEOs.
We Know Female CEOs Get Paid More, But We Don’t Know Why
Recent research shows that female and minority CEOs earn more on average than their white male counterparts. Why would this be so? It could be that the companies with female and minority CEOs have more progressive policies that recognize the importance of promoting and rewarding non-white males. It’s also possible that these individuals are simply better at their jobs, thus worth more. Or it could be supply and demand: if the supply of qualified women and minority chief executives doesn’t match the demand, then their compensation will be higher. The literature on morality suggests two other explanations: Perhaps companies pay top female and minority CEOs higher salaries, at least in part, to right past wrongs and improve their images, something known as moral cleansing. Or they may do it to ensure that any morally dubious actions taken in the future won’t do as much damage to their reputations, something called strategic moral licensing.