Diversity Works, So Start Paying for It

In the UK, the Davies Review, which focused on the task of improving the gender balance on the boards of Britain’s biggest companies, has moved the dial considerably. Around 12 percent of board members amongst FTSE 100 companies were female in 2011, by 2015 that figure had risen to 26 percent. The figure today is 29%1.

To top that, our UK CEO Value Index research showed in June 2016 that more than 35% of the largest 150 UK companies have a female remuneration committee chair.

As we said then, we were used to the fact that the ‘new normal’ was a powerful female chair of the remuneration committee (‘remco’) tackling the challenging issues surrounding executive pay.

We even went as far as proposing that the efficiency of a female chaired remco was greater than its male counterpart, measured in terms of our CEO Value Index.

The answer was interesting: companies with female remco chairs consistently outperformed those with male counterparts in our Index.

Now we have something else to add into that mix. The London Office surveyed 250 companies on Diversity and Inclusivity (D&I) and found that 53% set ‘closing the pay gap’ as amongst the highest priority or an important priority, 62% set gender pay equity, and 66% set D&I as a priority.

This isn’t necessarily action, but nor is it irrelevant. Uber will use specific diversity targets to determine CEO bonus from now on, Microsoft and Intel use diversity goals amongst 50% of their executive bonus metrics, and Johnson & Johnson and Facebook reward both employees and executives for hitting specific goals tied to diversity and inclusivity. At the same time, over 65% of the companies we surveyed had an individual who has been designated responsible for diversity and inclusivity.

The not-so-good news is that only about a third of those surveyed measure D&I outcomes or provide training. Similarly, only one third of those surveyed report actions to increase diversity when recruiting new hires, and less than one quarter take action to increase diversity when promoting employees. Perhaps most damningly, only 14% of organisations report a formal process to increase female representation in management and/or executive positions, despite the fact that only 29% of executive, senior level, and managerial positions are held by women. This, more than anything, drives the ‘gender pay gap’.

Not to put too fine a point on it:

Whatever women do they must do twice as well as men to be thought half as good. Luckily, this is not difficult”2

1 Women are now in 29% of directors' seats on FTSE 100 boards, up from 27.7% in October 2017 because companies recruited more female non-executive directors; 264 women now hold 305 FTSE 100 directorships

2 Charlotte Whitton, first female Mayor of the City of Ottowa

As Managing Director, Simon Patterson leads the team at Remuneration Associates (Rem.n), a specialty consulting firm focused on executive pay owned by the professional staff themselves. Formerly Pearl Meyer (London), the team have 35+ years of accumulated experience working together, they are actively engaged as advisors to remuneration committees of some of the largest and some of the fastest growing companies, globally. Mr Patterson and the team consult widely on executive compensation, incentive compensation design, and performance measurement.

Pearl Meyer agreed to divest its London operations on June 17th, 2022. Simon Patterson (Managing Director) and his team now own Remuneration Associates Ltd – an independent consulting firm working with clients around the world, which builds upon the legacy of the London operation.


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