By Vanessa Calvache, Policy Intern, ShareAction
Across Europe, women continued to be paid less than men for the same work.
In 2018 – the latest time these figures were made available – the gender pay gap was 14.1 per cent. This means that women in the EU earned on average 14.1 per cent less than men.
Almost a decade earlier the gap stood at 13.8 per cent. It’s clear that not much progress has been made since.
To tackle this issue, the EU has submitted new guidelines for remuneration policies, under the Investment Firms Directive. These include a requirement for gender neutral remuneration policies within investment firms.
But to really close the gender pay gap these guidelines need to go further.
Strengthening the definition of gender neutral remuneration policies
ShareAction has submitted a response to the European Banking Authority’s consultation on its new guidelines.
One requirement in the guidelines is for investment firms to establish gender neutral remuneration policies for all staff.
This means pay policies that are consistent with the principle of equal pay for equal work.
The equal pay principle has been enshrined in EU Treaties for more than 60 years but has not sufficiently prevented women from earning less on average than men.
Not only do women still earn less, but a recent evaluation of the enforcement of the equal pay principle shows inadequate progress on this front.
In short – employers are not doing enough to ensure women are equally paid.
If gender neutral remuneration policies are grounded on the principle of equal pay, then the gender pay gap, as a key barrier to the enforcement of this right, must be addressed.
We’re calling for the EU to strengthen its guidelines by setting a definition of gender neutral remuneration policies that prioritises tackling the gender pay gap in investment firms.
Aligning remuneration policies with gender equality targets
Another key point in the guidelines is ensuring gender neutral remuneration policies are consistent with investment firms’ business risk management.
But we believe these pay policies should also be aligned with investment firms’ sustainability performance objectives on social issues (the “S” of ESG).
As research from the Workforce Disclosure Initiative shows, investment firms do not understand how their activities foster gender inequality amongst the most precarious or vulnerable female workers. They are not yet taking action to mitigate this.
This means they are not identifying and integrating their gender inequality impacts into remuneration policies.
If pay policies are linked to performance targets for reducing the gender pay gap within investment firms, this requires an evaluation of the components of remuneration that do not meet internal gender equality objectives.
Action plans to address failed targets could then be incorporated into subsequent remuneration policies which would close gender gaps and promote truly gender neutral pay policies.
Remuneration Committees' engagement with shareholders on gender equality issues
Shareholders play a crucial in reshaping corporate behaviours to ensure that firms promote and advance gender equality.
Through engagement and voting policies on diversity, investors send a strong signal to firms on their gender remuneration policy performances.
However, the new guidelines require remuneration committees to merely inform shareholders on remuneration policies.
If investors are serious about advancing gender equality in remuneration policies, they must play a bigger role in remuneration committees.
As such, we recommend remuneration committees actively engage with shareholders on gender equality issues within firms’ direct operations and across their supply chains.
For example, remuneration committees should explain how integrating shareholders’ gender equality voting policies and practices into remuneration policies have resulted in the development of better gender neutral pay policies.
Towards a gender equal Europe
The European Banking Authority aims to finalise guidelines after this consultation. The publication of a final guideline is expected before the end of June 2021.
ShareAction will continue to engage with policymakers, financial institutions, investors and NGOs to provide practical recommendations and guidance to promote a gender equal investment system.