Male To Female Ratio On Boards Impacts Pay

Women earn 8.9% less than men at nonprofit organizations with the gap becoming greater when there is room for salary negotiations. Women close some of the gap if there are more woman on the organization’s board.

The paper, “Negotiation and Executive Gender Pay Gaps in Nonprofit Organizations,” was accepted for publication in the Review of Accounting Studies.

The study was co-authored by Curtis Hall, Ph.D., an associate professor at Drexel University’s LeBow College of Business; Andrew R. Finley, assistant professor at the Robert Day School of Economics and Finance at Claremont McKenna College; and LeBow College of Business doctoral student Amanda R. Marino.

The researchers first looked at whether or not a gap in pay does exist among executives in the nonprofit sector and then, the extent to which negotiation opportunities, either real or perceived, contribute to this difference.

They looked at external employment options for the nonprofit executives, an organization’s constraints in paying executives, the gender composition of leadership and the pay variability within executive ranks. Each of these factors uniquely influence the negotiation environment, according to the authors.

“For various reasons we may not expect to observe a gender pay gap among the nonprofit sector even though recent research has found gaps in pay among for-profit executives,” according to Hall. “First, there is more female participation in the nonprofit workforce compared to the for-profit sector. Second, one may expect stakeholders, like donors or boards of directors to curtail gender pay gaps, but we didn’t find this to be enough of a factor to prevent gender pay gaps.”

In organizations with greater female board representation, and/or the presence of a female CEO, the pay gap is reduced, according to the authors. 

Higher female board representation “reduces the pay gap and that NPOs with female CEOs have significantly smaller pay gaps among non-CEO executive positions.” The authors cited research that women are more willing to negotiate with other women, thus, “we interpret these findings to suggest female leadership increases female employees’ willingness to negotiate, thus mitigating benefits that men disproportionately accrue.”

“Employers should be cognizant of how the environment for negotiating compensation within their organizations can lead to gender-based pay disparities. Perhaps more importantly, business leaders and educators should think about ways to empower female workers to get more out of salary negotiations, which would hopefully help to close gender pay gaps in the future,” according to Hall.

The authors recognized that executive characteristics, for which data are not available to them, such as age, experience, or education, could also account for the observed pay gap and present a limitation to the study.

You can download a copy of the research here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3385848