New Report Highlights 16% Gender Pay Disparity Among CFOs

Title VII and, to some extent, Title IX of the Civil Rights Act protects individuals from discrimination on the basis of sex. These laws are usually recourse for either the discriminated employee to fight for injunctive relief or for damages by targeting the specific employer that allegedly committed the discrimination. However, when sex discrimination is practiced by an entire industry, the law is silent. This practice essentially leaves the country with an extremely slow and costly path towards equality in the workplace.

A recent report by GMI Ratings which was published by Bloomberg Businessweek discovered that male CFOs across the country make an average of 16 percent more than female CFOs who were similarly situated. The report took into account several factors that may explain the disparity in compensation that would not involve discrimination. For example, it found that women CFOs were generally younger than their male counterparts; therefore, the males’ compensation would naturally be higher because they would have more experience in the industry. On the other hand, however, the tenure that both males and females accumulated in their respective companies was very similar. The report concludes that even while taking these factors into consideration, the disparity is too large; something else is at play.

The study neglected to mention that women are more likely to suspend their careers to raise a family, but also ignored the face that men tend to accumulate shorter tenures in individual companies because they are more likely to switch employers often throughout their careers. These factors are also important to consider when determining whether sex discrimination has something to do with the large compensation disparity.

Taking the study at its face value, it points to a drastic problem in employment discrimination: how to fight employment discrimination when the employee affected has no “similarly situated” coworker within the same employer? For example, companies tend to hire only one CEO or CFO. This means that the job duties, responsibilities, and compensation levels are going to be different than those of any other position in the company. When attempting to prove disparate treatment in an employment sex discrimination case, a plaintiff must prove that a “similarly situated” employee of the opposite sex was given preferential treatment. When there are no other employees with which to compare, the plaintiff’s case is weakened. In disparate impact cases, statistics will be hard to find to prove that sex discrimination has occurred when there is only one person affected.

A plaintiff in this position may be forced to make the argument that a hypothetical person of the opposite sex would have been compensated at a higher rate than the plaintiff simply because of the differences in sex. This argument is a losing argument in almost any litigation. Because of this, female CFOs across the country find themselves helpless when they are discriminated against. Under current employment discrimination law, employees can sue their individual employers but they cannot sue an entire industry (or group of employers practicing the same discrimination). While their cases maybe much stronger when taken together, each employee is forced to argue her case individually.

This creates a slow and costly road to employment equality for people who occupy unique positions within a company. Instead of joining together in a pseudo class action that includes employees from multiple employers, each employer’s employees must file separately. This means that the individual employee’s case will be harder to prove but it also means that discrimination in the industry must be litigated in hundreds of little cases instead of only one or a few larger ones. Because litigation is by nature slow and costly, the more of it there is, the slower the anti-discrimination process will be.

Finally, adding to the self-perpetuating cycle of discrimination is the fact that women who have achieved very high positions like CFO are not likely to speak up against their employer. One reason is that they have already achieved a great deal within the company and owe a great deal to it. Additionally, the company’s argument against the existence of discrimination would be that the very fact that the company has appointed a woman to the CFO position means it is not discriminating. Nonetheless, discrimination can take different forms and the fact that a company does not discriminate in hiring or promoting does not mean that it does not do so in compensation. As the report indicates, female CFOs are a great example of this principle.

You can find an article detailing the report here.