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Analysis Shows Companies Without Gender Pay Gap Outperform Others

Refinitiv ESG study shows companies with no gender pay gap outperform companies with pay gaps between male and female employees.

When companies pay equal wages to both men and women, their stock performance and shareholders benefit. Such is the result of a Refinitiv study that analyzed five FTSE Russell indices and their constituents for their stock performance between 2016 and 2021.

Even more significant was that the outperformance of companies with no pay gap between male and female employees was the greatest in North America.

Cumulative investment return over the measured time period (just over five years) had a spread of 135.92% over the return of companies from the FTSE North America index that had a wage gap. When looking at the FTSE Developed portfolio, the cumulative return of the no-gender-pay-gap portfolio was 65.41% over the performance of the portfolio of companies that had the pay gap.

Photo Courtesy Refinitiv

Europe, Asia Pacific, and All-World all had lower spreads of outperformance, at 33.43%, 55.10%, and 58.16%, respectively.

The better stock price return of companies with no gender pay gap might be one of the reasons why money managers pay more and more attention to that metric when creating funds for investors.

For example, SPDR MSCI USA Gender Diversity ETF (SHE) tracks an index that selects U.S. firms that are leaders in their sectors when it comes to promoting and supporting gender diversity through all management levels.

The $193 million fund also favors organizations that promote advancement via diversity policies and programs. The firms in the index are weighted based on their market capitalization, but also depending on their Gender Diversity Score. The score measures the representation of women in a firm as well as its diversity management.

The ETF was launched in 2016 and has returned an average of 7.92% per year since. Some of its top holdings include known names such as Microsoft, Apple, Amazon, Visa, Cisco, Accenture, Meta Platforms owner of Facebook, UnitedHealth Group, and Johnson & Johnson.

Despite Refinitiv’s encouraging results on the stock performance of firms that have no gender pay gap, the difference between the earnings of men and women hasn’t improved much in two decades, according to the Pew Research Center.

Photo Courtesy Pew Research Center  

“In 2022, American women typically earned 82 cents for every dollar earned by men. That was about the same as in 2002, when they earned 80 cents to the dollar,” stated Rakesh Kochhar, a senior researcher at Pew. “The slow pace at which the gender pay gap has narrowed this century contrasts sharply with the progress in the preceding two decades: In 1982, women earned just 65 cents to each dollar earned by men.”

Kochhar noted that there is no single explanation for why the progress toward reducing the pay gap has stalled in the 21st century.

He said that women usually start their careers closer to parity with men, but their earnings progress less well with age and throughout their work lives.

“The pay gap persists even though women today are more likely than men to have graduated from college,” he further stated. “In fact, the pay gap between college-educated women and men is not any narrower than the one between women and men who do not have a college degree.”

Pew’s study looked a women’s compensation vs. men’s in the U.S. by analyzing monthly Current Population Survey (CPS) data from 1982 to 2022. CPS is the official source of various employment metrics from the U.S. government.

Refinitiv’s report provides a few insights into how companies can benefit from reducing the gender pay gap.

By disclosing their efforts on closing the pay gap, companies increase their chances of attracting more diverse and talented workers.

The efficiency of teamwork might increase, while legal action due to pay or discrimination claims could decrease.

“The good news is that more companies are reporting gender pay gaps, due to pressure from investors and customers, government regulation, or efforts to improve their ESG scores,” stated Refinitiv’s report. 

The Refinitiv’s ESG database shows indeed that more companies disclose that information: “The gender pay gap metric was added to the Refinitiv ESG database a few years ago and our recent analysis shows that companies with no gender pay gap outperform companies with pay gaps between male and female employees.”


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