Diversity and Inclusion Without Equity? Evidence from Executive Compensation

Abstract

Using cosine similarity methods, we find that female top executives (except CEOs), receive less equity-based pay than male top executives. This inequity in gender pay structure is associated with an $87,000 annual pay gap in top executive teams. Firms with similar gender pay structures exhibit superior operating performance and ESG scores. In women-led companies, all other members of the top executive team enjoy more similar pay structures. Moreover, the longer a woman serves as CEO, the lower the within- firm pay disparity. These results suggest that pay structure similarity captures whether the firm’s culture fosters diversity, equity, and inclusion as well as a stakeholdercentric approach to doing business.