"Reverse Pay Gap?" Female CEOs Make More Than Male Peers

The latest blow to the mainstream media’s misleading narrative about the relationship between gender and compensation has been delivered by the Wall Street Journal’s annual report on CEO pay, which revealed that - country to popular perception - female CEOs of S&P 500 companies actually earn more than their male peers.

In what WSJ described as “an unusual reversal of the gender pay gap,” the paper found that last year, 21 female CEOs of S&P 500 companies received a median compensation package of $13.8 million, compared with $11.6 million for 382 male chief executives.

Contrary to popular belief, women who make it to the top rung on the corporate ladder likely find that their gender – if it has any impact at all – likely works in their favor because, as the WSJ delicately suggests, corporate boards don’t want to risk a PR disaster by underpaying a female chief executive.

Or as Robin Ferracone, head of Farient Advisors LLC, puts it: “Boards don’t want to shortchange their female CEO in today’s environment, when pay equality is such an issue.”

Female CEOs also benefit from the perception that “these women must be exceptional” because so few reach the corner office, Heidi Hartman, president of the Institute for Women’s Policy Research, told WSJ.

Male executives still outnumber their female peers by a considerable margin, but WSJ found that female CEOs made more money than male execs during six of the last seven years. What’s more, for the first time in history, three female CEOs rank among the top 10 highest paid corporate execs. They are Meg Whitman at Hewlett Packard Enterprise Co., Virginia “Ginni” Rometty at International Business Machines Corp. and Indra Nooyi at PepsiCo Inc.

Women-led companies also posted higher returns, on average, than male-led firms. As WSJ reports, S&P 500 businesses now run by women generated a median total shareholder return of 18.4% in 2016, compared with 15.7% for those commanded by men. Returns at female-led firms outpaced returns at male-run companies in three of the previous five years.

Of course compensation still varies widely based on the firm’s performance: At HP Enterprise, which posted a total return of 55% last year, CEO Meg Whitman earned $35.6 million during the year ended Oct. 31 – more than twice what she earned a year earlier when she was running the combined Hewlett-Packard Co.

Though, as WSJ noted, Whitman’s latest package included a special equity grant tied to the debut of HP Enterprise. Aside from such one-time items, “Meg’s target compensation has remained unchanged over the past three years,’’ a company spokeswoman said, describing part of her package.

Mylan NV had the lowest one-year return among women-led companies at minus 29%, and longtime CEO Heather Bresch’s compensation fell to $13.8 million down from $18.9 million the previous year.

To be sure, not all female CEOs are immune to criticism about bloated pay packages: IBM CEO Ginni Rometty earned $32.7 million last year, up from $19.8 million a year earlier, while her company saw revenue decline for the 20th straight quarter.
Her 2016 package included 1.5 million stock options, which she can’t fully exercise unless IBM’s stock price increases as much as 25%, according to the company’s proxy, but she can hold on to those options for 10 years.
About 46% of votes cast at this spring’s annual meeting opposed the company’s executive pay practices, which represents a record level of IBM investor opposition for a “say-on-pay” vote.