Scrutiny Of Gender Disparities In Compensation: At The Executive Level And Below

By most reports, fewer women than men occupy the C-suite and those that do are paid less than their male counterparts. In its recently published 2012 S&P 500 CEO Pay Study, a leading provider of executive compensation data, Equilar Inc., reported that only 12 of the 500 chief executive officers in this year's study were women. Although the average total shareholder return (TSR)1 for the companies run by the female CEOs far exceeded that of the companies run by men (2.7 percent for women compared with 0.2 percent for men), the women were paid an average of almost $500,000 per year less than their male counterparts. A similar study conducted by GMI Ratings, a corporate governance consulting firm, analyzed the salaries of more than 1,900 chief financial officers and found that female CFOs were paid an average of 16 percent less than their male counterparts of similar age at companies with comparable market values.2

This article examines some of the laws that prohibit gender-based pay disparities, the Obama administration's attention to this important issue, and a prediction about what to expect in the coming years.

Statutory Prohibitions on Wage Discrimination

Federal efforts to legislate gender-neutral pay policies and pay equity began with passage of the Equal Pay Act of 1963 (EPA). Hailed by Congress as ''the first step towards an adjustment of balance in pay for women,''3 the EPA amended the Fair Labor Standards Act of 1938 (FLSA) to prohibit sex-based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort, and responsibility under similar working conditions. A wage disparity is not unlawful under the EPA if it is justified by a (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality of production, or (4) a differential based on any other factor other than sex.

Initially, the EPA did not apply to executive employees or others who were exempt from the overtime provisions of the FLSA. It was later amended to expand coverage to include FLSA-exempt employees. Enacted one year after the EPA, Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, or national origin. Thus, Title VII also makes it illegal to discriminate based on sex in pay and benefits. Although there is overlap between the EPA and Title VII, Title VII requires only that the jobs being compared are ''similar,'' a more relaxed standard than the ''substantially equal'' standard applicable to the EPA.4

Nevertheless, Title VII imposes other burdens that do not exist under the EPA. Specifically, an individual asserting a claim for discrimination under Title VII must first file an administrative charge of discrimination within 300 days in most states (180 days in those few states without a fair employment practice agency). There is no administrative filing requirement under the EPA, and the statute of limitations is two years—or three if the violation was willful. If an individual can meet the high threshold of proving the jobs are ''substantially equal,'' however, she need not prove that the employer intended to discriminate or meet the shorter administrative filing deadline.

Nine days after taking office, President Barack Obama signed his first piece of substantive legislation, the Lilly Ledbetter Fair Pay Act of 2009 (LLFPA). Amending Title VII, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, and the Age Discrimination in Employment Act of 1967, the LLFPA provides that an individual subjected to compensation discrimination can file an administrative charge of discrimination within 300 days in most states (180 days in those few states without a fair employment practice agency) of when the...