Morningstar - Q2 2023 - 15

EXHIBIT 2
by men in top corporate roles, according to
compensation data reported by companies in 2022.
Of course, women are disproportionately
absent from the top-paying CEO roles. However,
even among non-CEO executives, women
earned just $0.91 of the $1 men earned in 2021.
This gender pay disparity, compounded by the
representation gap, drove $18 billion more
into men's pay packages than women's in the
most recent fiscal year for which full compensation
data has been reported ( EXHIBIT 2 ). Over the
10 years of the study, the cumulative gender-based
difference for top S&P 500 executives amounts
to about $152 billion.
The numbers also show that both men and women
in the C-suite-CEOs in particular-have enjoyed
substantial pay growth, far outpacing workers'
earnings and the performance of the broader
economy. That exacerbates society's gender-based
economic imbalance. In 2021, average S&P 500
CEO pay grew 21.5%. During that time, workers'
real average hourly income fell.
Investors Lose When Women Are
Underrepresented in Corporate Leadership
Besides the real implications for societal inequality,
C-suite gender gaps also challenge corporate
commitments to create more equitable workplaces
because they indicate persistent obstacles
to the advancement of women in the workplace.
According to McKinsey's annual Women in
the Workplace survey, women are less represented
further and further up the corporate ladder,
largely due to difficulties they face landing earlycareer
promotions into higher-paying jobs-
which the report calls the " broken rung " -as well
as other headwinds they face in the workplace
and outside. Importantly, the survey finds
that women are no less likely to aspire to moresenior
positions.
Yet, research suggests that women may bring
a longer-term view to business leadership. This
Gender Pay Gap Persists Even skyrocketing compensation can't bridge the difference
between what male and female executives make.
% of Named Executive Officers
Male
Female
100
80
60
40
20
2012
2013 2014 2015
Fiscal Year
Source: Morningstar Executive Insight database. Data as of Feb. 27, 2023.
2016
2017
2018
2019
2020 2021
Female
4.2
Average Executive
Compensation
Male
8.5
Female
7.0
Median Executive
Compensation
Male
5.4
2
$10M
8
6
4
benefits investors and other stakeholders, because
many of the most important challenges facing
business are of a long-term nature. It's over the
long term that value is created in firms and markets.
Morningstar research conducted in 2021 shows
stronger longer-term stock price performance
and lower risk among the few U.K. companies that
have greater than 50% female representation
on boards and management teams.1
By contrast,
the stock performance of all-male board and
management teams appeared to be the most
volatile over a three-year period. Similarly, Harvard
researchers tracked appointments and found
that when women join the C-suite, they catalyze a
shift in corporate thinking that may support
new longer-term, internally cultivated valuecreation
strategies.2
A particularly pressing long-term challenge
for businesses is building climate resilience into
corporate strategy. PwC's 2022 board member
survey found that 66% of female directors
agree with prioritizing climate action, even if it
affects short-term financial performance,
whereas 45% of male directors endorsed this
position.3
Evidence presented in two recent
academic studies shows that having more women
in senior leadership roles translates into
better corporate environmental performance.4
U.S. corporate C-suites have a long way to go to
gender parity, but investors have the power,
and good reason, to accelerate this change. K
Jackie Cook is director, stewardship, product strategy and
development, at Morningstar Sustainalytics.
1 Kolostyak, S. 2021. " Is Performance and Gender Diversity Linked? " Morningstar UK, Oct. 22.
2 PwC Governance Insights Center. 2022. " PwC's 2022 Annual Corporate Directors Survey: Charting the Course Through a Changing Governance Landscape. "
3 Post, C. et al. 2021. " Research: Adding Women to the C-Suite Changes How Companies Think. " Harvard Business Review. April 6.
4 Al-Najjar, B & Salama, A. 2022. " Mind the Gap: Are Female Directors and Executives More Sensitive to the Environment in High-Tech U.S. Firms? " Technological Forecasting and Social Change,
Vol. 184, November; Altunbas, Y., et al. 2022. " Does Gender Diversity in the Workplace Mitigate Climate Change? " European Central Bank, Working Paper No. 2650, February.
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https://www.morningstar.com/authors/2254/jackie-cook https://www.morningstar.co.uk/uk/news/214500/is-performance-and-gender-diversity-linked.aspx https://www.researchgate.net/publication/363641308 https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2650~3b693e6009.en.pdf http://www.morningstar.com/products/magazine

Morningstar - Q2 2023

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