For the first time in years, the average compensation for chief executive officers was down, not up. Average CEO pay in 2015 was $19.3 million, down 15 percent from $22.6 million in 2014.
There was, however, a countertrend. Contrary to what might have been predicted – more women on more boards are widely viewed as tantamount to better corporate governance – companies with greater gender diversity paid their chief executives 15 percent more than companies with lesser gender diversity.
What’s going on here? The explanation provided by an expert on corporate governance, Nell Minow, to Gretchen Morgenson of the New York Times, is the pressure on women to conform. Women, Minow said, “are under even more pressure to go along and get along.” Therefore, Minow suggests, in order not to be perceived as deviant, women vote in greater numbers for greater CEO pay packages.
This explanation would be more persuasive if the percentages of women on boards were lower. The pressure on minorities in groups and organizations to conform is great, but it is greatest when their numbers are lowest. When, in contrast, there is a critical mass, when the number of minority members approaches 30 percent of the total, this pressure is much less.
The following figures pertain:
- Of the 100 largest companies studied, 57 percent had boards on which women comprised more than 20 percent of the membership.
- At the 10 large US company boards with the greatest gender diversity, more than a third were women.
What can we deduce even from these numbers? First, that on the boards of some large US companies, the number of women did reach critical mass. Second, that many of those that did not reach critical mass, 30 percent women, did have many more women on their boards than mere tokenism would suggest. Third, that so far there is no evidence that if they were indeed equally represented, women on boards would decide on executive compensation differently from men on boards. Fourth, that what Nell Minow provides as explanation is speculation. There is as yet no evidence that confirms that on the issue of executive compensation, the pressure to conform is a, not to speak of the, determinant.
To be sure, although female representation on boards in some companies is relatively high, certainly in comparison with what it was even five years ago, female representation on critical committees, including compensation committees, remains low. This could turn out to be key. But, my point is that we do not now know why more companies with more women on their boards vote for more executive pay. All we know is that whatever the explanations, they are speculations.