Male, female executives' bonuses uneven

HR Magazine, Oct, 2008 by Rebecca R. Hastings

Low expectations for female executives may explain the earnings imbalance between men and women, researchers suggested at the 2008 Academy of Management Annual Meeting held in August.

Male executives tend to be rewarded handsomely when their companies flourish, for example, but female executives see practically no bonus gains, according to Who Gets the Carrot and Who Gets the Stick? Evidence of Gender Disparities in Executive Remuneration, a study of British businesses.

The researchers studied British companies' bonus payments to top executives between 1998 and 2004. Female executives of 96 companies were matched with male executives who performed analogous functions in companies of about equal size in a similar industry.

The researchers analyzed the relationship between companies' financial performance (in terms of return on assets combined with a stock-price-related measure) and the executives' bonuses the following year, controlling for factors such as company size, stock-price volatility, industry differences, and executives' tenure and age.

They found that as a company moves from the lowest to the highest levels of financial performance, the expected bonus for male executives increased by 263 percent while the corresponding increase for a female director was only 4 percent.

Moreover, the male executive director's bonus as a percentage of salary rose from 15.1 percent to 59.8 percent, while for females the bonus rose from 28.1 percent to 37.2 percent of base salary.

"Put differently, the relative increase in men's bonuses as a function of improvement in company performance is approximately nine times larger than women's increase," the authors said.

The U.K. study researchers noted that the bonuses of top female executives vary little whether their companies perform brilliantly or dismally. "The fact that female executives are neither rewarded nor punished for their work can be seen as an indicator of a more generalized organizational apathy and indifference toward women," the authors concluded.

For Companies Moving from Low to High Financial Performance ...

Expected Bonus Increase for Male Executives    263 percent
Expected Bonus Increase for Female Executives    4 percent

Source: Who Gets the Carrot and Who Gets the Stick? Evidence of Gender
Disparities in Executive Remuneration

By Rebecca R. Hastings, SPHR, an online editor/manager for SHRM.