Women in command of America’s biggest businesses are reaping rich rewards.
In an unusual reversal of the gender pay gap, female chief executives at some of the largest US companies repeatedly outearn their male counterparts. Last year, 21 female CEOs received a median compensation package of $US13.8 million ($18.6m), compared with the $US11.6m median for 382 male chiefs, according to a Wall Street Journal analysis of S&P 500 leaders who held the job for a full year.
Women in the corner offices of the biggest US firms made more money than men in six of the past seven years, though the gap has narrowed since 2014. The trend reflects several factors including strong performances at major businesses run by women during recent years, plus the fact that several female CEOs are pursuing tough turnarounds, which boards typically reward.
“Boards don’t want to short-change their female CEO in today’s environment, when pay equality is such an issue,’’ said Robin Ferracone, head of Farient Advisors, which advises board compensation committees.
The total number of women running S&P 500 companies held steady from the previous year’s analysis at 28, including seven women who retired or held the job less than a year, and remains about 5 per cent of the total. But for the first time in the Journal study’s 28-year history, three of the 10 highest-paid executives in the overall sample are women.
They are Meg Whitman at Hewlett Packard Enterprise, Virginia “Ginni” Rometty at IBM and Indra Nooyi at PepsiCo.
Most of the 21 female leaders advanced into their roles within a company rather than getting recruited. “These women must be exceptional” because so few reach the corner office, said Heidi Hartman, president of the Institute for Women’s Policy Research.
S&P 500 businesses now run by women generated a median total shareholder return of 18.4 per cent last year, compared with 15.7 per cent for those commanded by men. Returns at female-led firms outperformed male-run companies in three of the previous five years. Total shareholder return measures changes in a company’s stock price and dividend payments.
“The board of a company with excellent shareholder returns and operational results likely will reward the CEO more, regardless of gender,’’ said Irv Becker, an executive pay specialist for Hay Group, a unit of recruiters Korn/Ferry International.
At HP Enterprise, which posted a total return of about 55 per cent, Ms Whitman earned $US35.6m during the year ended October 31. The technology giant emerged from Hewlett-Packard’s 2015 split into two businesses. The CEO made double the $US17.1m she earned a year earlier while running the combined company.
Ms 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.
Mylan had the lowest one-year return among women-led concerns, posting -29 per cent. The drugmaker faced a furore over hefty price increases for its lifesaving EpiPen. Longtime chief Heather Bresch received $US13.8m last year, down from $US18.9m the previous year.
“We place a clear emphasis on variable, performance-based compensation,’’ with about two-thirds of Ms Bresch’s 2016 annual target compensation tied to performance, Mylan’s proxy statement said.
Certain female chiefs earned hefty pay packages because they’re trying to transform their employers. “Turnaround CEOs always get a premium because a turnaround is hard,’’ said Jan Koors, a senior managing director for Pearl Meyer, a compensation consultancy.
As their pay packages reach the highest tier, some female CEOs like Ms Rometty are coming under additional shareholder scrutiny. IBM’s leader is trying to offset waning older businesses with younger ones such as cloud computing, but revenue fell for the 20th consecutive quarter during this year’s first three months.
IBM paid Ms Rometty $US32.7m last year, up from $US19.8m a year earlier. 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 per cent, according to its proxy.
Many IBM shareholders consider Ms Rometty overpaid. About 46 per cent of votes cast at this spring’s annual meeting opposed the company’s executive pay practices. That represents a record level of IBM investor opposition for a “say-on-pay” vote. The nonbinding referendum began in 2011.
Directors will review results of the 2017 shareholder votes “as they do every year”, an IBM spokesman said.
By Joann S. Lublin
Source: The Wall Street Journal via The Australian
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