Board Remuneration: Miles to go for Women Directors

 Pay gap reflects poor representation of women at the top, but situation changing with younger women aiming for high-paying roles

For every 100 that a male non-independent director earned on the board of a large Indian company in FY18, his female counterpart earned 74. The gap in average remuneration earned by men and women directors stood at 1.2 crore, according to data sourced from Prime Database for BSE100 companies. On average, 412 male directors earned 4.5 crore in comparison with 52 women directors who earned 3.3 crore in the last fiscal. Does this reflect deep-seated discrimination or are there other forces at play? “Pay gap is a function of labour market participation, degree of executive discretion, compliance with labour laws, selection bias or pure serendipity,” said Bino Paul, dean of School of Management and Labour Studies at the Tata Institute of Social Sciences (TISS). “There are regression analysis methods like Oaxaca Decomposition to find the proportion of discrimination due to gender.” The pay gap is 5 lakh in the case of independent directors, although this has been shrinking over the past three years. While male independent directors have drawn 36 lakh remuneration on average in each of the last three fiscal years, the average pay of their female peers has steadily increased from 27 lakh in FY16 to 29 lakh in FY17 to 31 lakh in FY18. The gender gap has been narrowing in recent times, said Falguni Nayar, founder and CEO of Nykaa, a cosmetics and wellness retailer, and an independent director on several boards. Women need to drive a harder bargain, she said. “As far as the role of non-independent directors is concerned, it will take coming generations to negotiate harder. I don’t think women negotiate hard enough,” she said. In the case of independent directors, she doesn't think companies differentiate based on gender “as it depends on the responsibilities taken, the committees they are in charge of, etc.” The pay gap reflects the poor representation of women at the top.
‘A Supply-Demand Issue’
 At 24%, India is among the lowest among peer countries in women’s participation in the overall workforce. This is starker at board level where there are about eight times more men than women. “It becomes a typical supply-demand issue in the labour market, where money chases the talent that is more readily available,” Paul said. In the five years since it became mandatory to have a woman on the board, representation has been growing but the pay gap hasn’t narrowed. That’s also down to the relevant function, said Biocon chairperson Kiran Mazumdar-Shaw. “I serve on several boards and disparity in board remuneration certainly is not the case—it’s about the role you play,” she said. For instance, committee chairs get paid more than committee members and those on audit committees get paid higher than others. “If it is about the fact that most of the roles are attributable to male board members, then there is likely to be a perceptible difference in board remuneration but it should be put into the right context and not just a generalised computation,” she said.
GLOBAL SCENERIO
Global studies have shown that the gender gap widens and diversity drops as one goes higher up the corporate ladder. The pay gap is most in the private sector, according to these. In the UK, legislation made it compulsory for all companies with 250 employees or more to report gender pay gaps by March. The results showed eight out of 10 UK companies paid men more with the national median pay gap at 18%. “Males are at high-paying positions because there are less females to take up those jobs,” said Ronesh Puri, managing director of Executive Access, a search firm. “With information on remuneration being available in the public domain, it is not possible to discriminate on this count as no female senior executive would agree to work at a lower pay package than drawn by the earlier incumbent.” Some companies incentivise search firms to get female hires for top management roles to improve diversity, “It is most likely a function issue rather than a gender one,” said Sunit Mehra of Hunt Partners. “Males are generally seen heading higher-paying functions like finance or operations compared to functions like HR or marketing.” The pay gap arises not because men and women are paid differently for the same work but because the labour market incentivises them to work differently, according to Claudia Goldin, Lee professor of economics at Harvard. One of the reasons women receive less pay than men is that they're not working the same amount of time and in many occupations, working more hours or being there when the firm wants you to be there earns you a lot more, she has said. Nayar said younger women are increasingly making stronger professional commitments. “Women, in general, need to commit to a serious career, be where an organisation needs them to be,” Nayar said. “I see those kinds of commitments in women of the younger generation giving to their careers, taking transfers to different countries as and when a requirement comes up.”

Source: Economic Times, 27/10/2018