Covid-19 spotlights remuneration disparities and gender pay gap
The pandemic has brought a refreshed focus on fair and responsible remuneration in SA
By now everyone is familiar with the theme of the “great reset” in response to the pandemic. Many of the trends PwC SA has been predicting, but which many said were three to five years away at least, have been accelerated. Suddenly we find ourselves in uncharted territory, wondering whether we should back-pedal and try to revert to the “old normal” or swim for a new shore.
We argue in our 2020 “Executive Directors: Practices and Remuneration Trends Report” that there is opportunity for change in a number of areas relating to remuneration, particularly as it relates to, and interacts with, the so-called environmental, governance and social (ESG) aspects of business.
Fair and responsible remuneration is not a new concept in SA, but there is a refreshed focus on it in view of the pandemic, which has highlighted income disparity globally in ways that are starker than ever before. PwC has been talking for a while about the new skills that will be required for a new world in which process-driven work is increasingly automated, but “creative and caring” roles become more valued. One of the things Covid-19 has brought to the fore is just how important creative and caring roles are in society.
The pandemic has emphasised that traditionally undervalued roles such as nursing, childcare and teaching, which are dominated by women, are vital to the effective functioning of society and are among the jobs most exposed to the virus. In our view this phenomenon will only increase as we move towards a more digitally fit world, where jobs that were traditionally valued and well remunerated will be filled by machines.
What does this mean for remuneration? It’s no secret that we, like every other country, have a problem with a gender pay gap. It should also be no surprise that the first problem is representation at the executive, and particularly CEO, levels. While previously the gender pay gap may have been relegated to second place (or lower) in priority in light of more pressing social and economic concerns, in the current environment it has become apparent that systemic change is required.
There is good news, and this should be celebrated. Twelve women have been appointed as CEOs of JSE-listed companies since May 2019. However, the sobering fact remains that of the total number of listed companies on the JSE at February 2020, only 6% have female CEOs (that’s 19 women).
In SA, as with most countries, there is a premium paid to CEOs compared with other executive directors, and this has an impact on the pay gap. The bigger the company is, the more complex it tends to be, and this means a bigger CEO pay package. As one might imagine, the problem is worse within the large caps (a 45% gender pay gap) compared with small caps (still shocking at 25%). Industries such as financial services seem to be doing better, with “only” a 7% gap. But it must be emphasised that it is difficult to assess gaps meaningfully when there are so few data points for women.
So what do we do? There is a widespread belief that to effectively improve the statistics, wider disclosure should be mandated. Within the reporting framework in SA there is definitely a renewed focus on transparency and improved disclosure. However, few companies make disclosures in their integrated reports that set out the gender pay gap and steps they are taking to close that gap. Most merely state that diversity and gender pay equality remains a focus area. The proposed amendments to the Companies Act include requirements for disclosure of the pay gap between lowest- and highest-paid employees but are silent on disclosure of the gender pay gap.
In the UK, a country that does have mandatory disclosure of the gender pay gap, the requirement for companies to provide disclosure on the gender pay gap within their organisations has been suspended for the 2020/2021 cycle due to Covid-19. In any event, there are mixed reports about whether the required disclosure is assisting in closing the gap, but acknowledgment that there is at least increased discussion about the topic and activity about identifying what systemic and cultural issues exist within organisations that may be causing or contributing to the disparity.
Many companies, including PwC, have introduced training programmes on unconscious bias in an attempt to stimulate behavioural change. This speaks to the recognition that gender inequality is a deep-rooted problem and cannot be addressed on a purely superficial level. Organisations need to identify the problems (understand what the gender pay gap is within their organisation and at different levels), but this is not enough.
Once the problem is identified, the hard work needs to begin. Rectifying the existing problem is urgent, but just as important is getting to grips with the underlying behaviour and culture that resulted in the problem in the first place. Inclusive teams, and inclusive leadership, are crucial, but these won’t happen on their own. Active efforts are required by organisations to ensure the systemic change so drastically required is achieved.
• Ebrahimi is co-lead, PwC Reward and director of people & organisation. The full report is available here.
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