CEO Memo: Navigating gender pay gap reporting — Vital insights for boards

Since its introduction in the UK in 2017, public reporting of gender pay gaps has been instrumental in shedding light on disparities and driving conversations around gender equality in the workforce. The worst performers were motivated to reduce the gap, and often made the biggest improvement. It is once again the old adage of what gets measured, gets done.

The recent Employer Gender Pay Gaps snapshot from the Workplace Gender Equality Agency has provided some thought-provoking insights about the Australian landscape, in the first year that organisations with more than 100 employees have been required by law to report.

Information from almost 5,000 employers, covering almost five million employees has found that the national median total remuneration pay gap is 19 per cent. That means that the median of what a woman is paid is $18,461 less than the median remuneration for a man.

The report also found that women are paid less than men across every industry — with the gap higher in industries with higher pay.

A third of employers have a neutral gender pay gap, which is an encouraging sign as it allows for normal business fluctuations and employee movements while indicating an employer has a focus on gender equality.

Crucially, the report found a clear link between more women in leadership and a lower pay gap, despite the fact that CEO and director remuneration has not been included in the current calculations.

It’s clear that directors, as custodians of organisational governance and strategy, play a pivotal role in addressing and reporting on gender pay gaps.

Boards hold the ultimate responsibility for overseeing organisational performance, including matters of diversity, equity, and inclusion. This type of reporting should not be merely an exercise in compliance, but a strategic imperative aligned with broader corporate objectives.

Governance Institute of Australia believes that by understanding and addressing gender pay disparities, boards can enhance reputation, attract top talent, and foster a culture of fairness and transparency — all the elements that go towards organisational good governance.

To achieve better outcomes for both business and equality, boards should be considering the following:

• Commitment to gender pay equity: Boards should publicly commit to achieving and maintaining gender pay equity as a core organisational value. This commitment should be reflected in the company’s mission, vision, and values statements, demonstrating a top-down commitment to addressing the issue.
• Setting clear goals and targets: Boards should establish measurable goals and targets for reducing the gender pay gap within specific timeframes. These targets should be ambitious yet achievable, with progress regularly monitored and reported to stakeholders.
• Conducting regular pay equity audits and ensure fair and transparent compensation practices: These audits should be comprehensive, examining all aspects of compensation, including base salary, bonuses, and benefits. To demonstrate fairness and transparency, boards should conduct salary benchmarking exercises, and eliminate biases in performance evaluation and promotion processes. For an analysis of remuneration, read the results of our 2023 Remuneration Report or take part in our 2024 survey which is now open.
• Promote equal opportunities for advancement: Boards should actively promote equal opportunities for career advancement and development for all employees, regardless of gender. This may involve implementing mentorship and sponsorship programs, providing leadership training, and actively encouraging female representation in leadership roles.
• Encourage flexible work arrangements: Boards should support and promote flexible work arrangements to accommodate the diverse needs of employees, particularly working parents. Flexible work policies can help reduce the gender pay gap by enabling women to balance work and family responsibilities more effectively. Find more in our Good Governance Guide on Flexible Working
• Invest in gender diversity and inclusion initiatives: Boards should allocate resources and funding to support gender diversity and inclusion initiatives within the organisation. This may include training programs to raise awareness of unconscious bias, diversity and inclusion workshops, and employee resource groups focused on gender equity.
• Board education and training: Boards should invest in gender diversity education and training programs to enhance Directors’ understanding of the nuances of the underlying causes of gender pay gaps and equip them with the tools to drive change. Governance Institute’s Effective Director Course has both mixed and a women-only option to assist in building pipeline capability.
• Hold management accountable: Executive management should be held accountable to the board for making progress on gender pay equity goals and targets. This may involve linking executive compensation to diversity and inclusion outcomes, conducting regular performance reviews, and providing incentives for achieving diversity objectives.
• Lead by example: By ensuring gender diversity within their own ranks, boards can lead by example. This may involve actively recruiting and appointing female directors, implementing term limits to promote board renewal and diversity, and creating a culture of inclusion within the boardroom. For more details, read our Board Diversity Index in collaboration with Watermark Search International.

This kind of reporting should not be merely a regulatory obligation, but a moral and ethical imperative, as it is clearly a strategic opportunity for to drive positive change and business growth.

By prioritising transparency, accountability, action and a culture of equality, directors can unlock the full potential of their workforce, and contribute to a more inclusive society.

Material published in Governance Directions is copyright and may not be reproduced without permission.