In 2020, a Pew Research Center analysis revealed women earned 84% of their male counterparts’ earnings. The gap is even deeper for Black and Latina women, who respectively earn 65% and 59% of white men’s earnings. This is not recent news, as the gender pay gap, as we ‘ve traditionally known it, has not changed much in the last 15 years. However, there is an another part of the gender pay gap we don’t often think of or talk about. It’s the equity compensation gap.
The Journal of Applied Psychology recently published a study which found a gap in equity-based compensation awards between genders ranging from 15 to 30%. This equity compensation gap closely mirrors the gender pay gap, taking into account a 20% pay gap in the United States and an estimated 17% gap in Europe. According to an analysis of venture-backed companies’ equity by Carta including over 6,000 companies and 15,000 founders, women were found to hold only 20% of equity despite constituting 35% of equity holding employees. For every dollar owned by male employees, female employees holding equity own just 47 cents. At the founder level, it was found while women make up 13% of startup founders, they only hold 6% of their companies’ equity. For every dollar of equity owned by male founders, female founders only own 39 cents.
While many businesses are striving to address the gender pay gap, they may not be addressing the gap in equity-based awards. As equity-based awards are incentives to retain employees, it can be inferred female employees are not seen as valuable as their male counterparts. Another inference is that women may not be able to build wealth as men do.
Among the factors contributing to the noted gender disparities in equity compensation, is the misinformation or lack of information among employees as related to equity compensation.
To remedy this, here are three ways women can reduce, and possibly eliminate the equity compensation gap:
- Talk to trusted colleagues and peers
Male employees often have access to career-related information women may not access, due to not belonging to the same circles. Much of this information points them towards what to negotiate for. This is why it’s important for women to create and nurture their social networks, and talk to trusted peers and colleagues. This is all the more important as women tend to be negatively viewed when negotiating or asserting themselves at work.
- Know what to negotiate for beyond salary compensation
Often, women come to the negotiation table without a clear understanding of equity and stock options’ value as related to their overall compensation. Too much emphasis is then put on salary, and not enough on other forms of compensation such as equity and stock options. Understanding this and knowing what (and how) to negotiate for, goes a long way towards reducing equity-based gender gaps.
- Advocate for pay transparency
Pay transparency is not only beneficial to employees, but can also help employers identify and remedy existing gaps. As advocates for pay transparency, women can encourage a process whereby female employees have a better understanding of compensation and what to ask for, and where bias is minimized or removed entirely.
All in all, the gender pay gap is more layered and deeply ingrained in the compensation structure than most of us know or realize. Being aware of and proactive about the gender gap in equity compensation can help peel another layer of the pay gap onion, thus reducing the inequity plaguing women at work.
Were you aware of the gender equity gap? If so, how are you fighting it at your level?
The Corporate Sister
