Women In Business School: Focus On Pay Divide To Increase Executive Diversity

New corporate focus on women’s pay could benefit future female business leaders

A great injustice for female MBA students has been the startling gap between their expected pay on graduation and what their male classmates will earn. But fresh pressure on the biggest companies to address pay inequalities may begin to bridge the salary gulf.

The Davies Review is considering setting a target for a quarter of top earners at FTSE 100 firms to be women.

The UK earlier this year met a Davies Review target that women should make up 25% of FTSE 100 board seats. But there are concerns that not enough has been done to place more women into leadership positions at all levels of an organization.

The pay gap is highlighted as an example of such inequality. Three years after graduation the average male MBA earns $137,000; women just $120,000, according to data from 2015’s MBA rankings by the Financial Times.

Lisa Buckingham, senior diversity adviser at the Institute of Directors, says that after making progress on getting women into boardrooms, “it’s absolutely right that the focus is now on trying to increase the number of women in senior executive positions”.

“Companies are going to have to think much harder about how they are going to address the gender imbalance in top management positions,” she says.  

Professor Susan Vinnicombe at Cranfield School of Management, says that after the FTSE 100 target success, “we need to see more women moving into executive directorships, senior independent directorships and chairman positions”.

By shining a light on women’s pay, experts believe companies may accelerate efforts to place women into leadership posts.

The Davies Review follows a recent UK government announcement that it will force companies with more than 250 employees to publish details of gender pay audits. The government said this will create pressure on firms to do more on gender diversity.

Dr Shaheena Janjuha-Jivraj, associate professor at Henley Business School, says that the UK has done well for women on boards.

“When a government publicly commits to a target and then works with businesses along with advocacy groups, this trio forms a strong coalition in sustaining momentum for women in leadership roles,” she says.

There have been calls for mandatory boardroom quotas to be implemented. But Sucheta Nadkarni, professor of Chinese management at Cambridge Judge Business School, who this year authored a study on women in society, warned that quotas are a “quick fix”.

Business education has been highlighted as a weapon for closing the gender divide. The IoD’s Lisa says that a better gender balance in senior roles will be the “natural result of more targeted training and development schemes”.

However, research from the Council of Economic Advisers shows the biggest pay gaps between women and men exist for those with advanced degrees, such as MBAs.

“In business and especially post-MBA, you see parity at graduation, and then the [gender pay] gap widening as they move onto the next step in their career,” says Elissa Sangster, executive director at Forté Foundation, which helps women launch business careers.

The Chartered Management Institute recently surveyed 72,000 UK professionals and managers at 300 organizations and found that male directors earned nearly £15,000 more than the average female director.

This will be particularly discouraging for business school students as some of the largest pay gaps exist in sectors such as finance, according to the executive recruitment firm Michael Page, which employs among the largest percentage of MBAs.

The firm’s analysis shows that male management consultants are earning £4,000 a year more than women working in the same occupation. Deloitte for example last month revealed that it pays women nearly 18% less on average than its male workers.  

“Unsurprisingly, this discouraging for women,” Dianne Bevelander, executive director of Rotterdam School’s Erasmus Centre for Women and Organizations, says of the general pay gulf. She adds that it is the “most naked form of discrimination”.

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