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Pay equity: A governance issue for corporate boards

, |By Jason White

As pay transparency laws sweep the nation intending to close the racial and gender pay gaps, pay equity has become a priority governance issue for corporate boards. 

We must prepare to look at our workplaces through multiple lenses and work collaboratively with people skeptical about the prevalent issues plaguing organizations everywhere.

In the latest episode of High Growth Matters, Kathie Ross, C-Suite Executive and Independent Director, joined us to explore her view on where we’re at in the pay equity conversation, where we’re heading, and what we can do to improve our environments. 

This blog has been adapted from that conversation and covers: 

  • The evolution of the pay equity conversation in recent years
  • Current challenges boards face as they wrestle with pay equity
  • The future of equity at work

Don’t miss the full episode: How Corporate Boards Can Solve the Pay Equity Issue

The evolution of the pay-equity conversation

For a long time, pay equity was not a concern in the boardroom. But that has drastically shifted in recent years. Now, pay equity has become a critical factor of a healthy workplace with the potential for success.

“Both executives and boards are currently in a perfect storm of issues — it’s suddenly become imperative for them to pay attention to DEI, transparency and ESG,” Kathie says. 

In addition to the challenging nature of addressing the technical and systemic issues behind equity, organizational leaders must also face the reputational risks of such high-key issues. Many organizations have a lot to lose if they make the wrong decisions around transparency and equity.

However, as more issues come to light and board members begin to juggle decisions and reputational risk, society is moving forward toward a more equitable environment.

Unfortunately, many organizations are attempting to push forward without the information they need to address the issues they are confronting adequately. 

Want to learn more about identifying pay inequities and addressing them, even if it doesn’t fit in your budget? Kathie shares the table stakes of moving toward pay equity, transparency and compliance — check out the full episode of High Growth Matters.


Challenges boards face as they wrestle with pay equity

According to Kathie, one challenge outweighs the rest — a lack of clear, relevant data. 

“We need concrete, realistic, actionable data,” she says. “We have to disaggregate data and get down to the details of what the workplace looks like and where the problems are.”

One of the easiest, most effective ways organizational leaders gather data is by asking the right questions. Luckily, many modern boards and C-suites are starting to do so. 

According to Kathie, boards need to be asking:

  • What information is being used to make decisions? 
  • Where's the information coming from? 
  • Who gets to participate in providing that information?
  • What compensation software and comp tools will help?

Currently, many organizations face the challenge of legality that bars them from inquiring about diversity directly from employees. But Kathie expects these laws to change in the near future.

“If there is transparency and trust with the executive management, employees will welcome providing what their identity is comprised of so we can work on making an inclusive work experience,” Kathie says.

Another major challenge that leaders should prepare for is pushback and defensiveness. The changes brought about by pay equity and transparency are uprooting decades of assumptions and experiences that are no longer relevant — for many, this is a difficult journey.

“We need to be prepared to look through multiple lenses and work collaboratively with people who are skeptical or scared about what the data will tell them,” Kathie says. 

Preparing for potential skepticism and defensiveness will be pertinent for forward movement. However, opening your mind to alternative viewpoints will also be vital. Compensation software with real-time data and compensation program design is helpful, but comp tools that help recruiters and managers make intelligence compensation decisions in the field are crucial.

Kathie recently joined the OPEN Imperative Board, a group of pre-IPO companies taking a stand to commit to eliminating pay disparities in their organizations by 2027. You can join the front against inequity for free and, in return, receive a complimentary Pay Equity Report — something states like California will begin requiring next year.


The future of pay equity in the workplace and governance

Early statistics have revealed that equity in the workplace goes far deeper than face value. With increased retention, job satisfaction and market competitiveness, the benefits of pay transparency are far more significant than compliance.

Kathie expects that regulatory changes will continue to spread across the country. But she also makes a prediction that delves into the future workplace's foundation.

“The biggest impetus of pay equity and transparency will be attracting talent,” Kathie says. “If you can’t be transparent and show people what you’re doing to address these issues, you won’t attract quality talent.”

We should also expect significant shifts in power distribution, according to Kathie. 

“What drives pay inequity is power distribution being so concentrated in one category,” she says. “Finding ways to really expand distribution, and then using that to drive compensation strategies and practices is important.” Compensation software and comp tools help.


Try OpenComp's compensation software and comp tools for free.

To hear this episode, and many more like it, you can subscribe to The High Growth Matters Podcast on our website, Apple Podcasts, Spotify, or just search for The High Growth Matters Podcast in your favorite podcast player.