Scrutiny of the gender pay gap in the U.S. and abroad has intensified in recent years and shows no sign of diminishing in the short term.
In the U.K., both private and public sector employers with at least 250 employees are now required to publish gender pay data. This is an annual obligation to publish details including the organization’s overall gender pay gap, the percentages of male and female employees across four quartiles and the gender pay gap in relation to bonuses. The deadline for the first reports was April 4, 2018, for private sector employers and March 30, 2018, for public sector employers.
Meanwhile, in the U.S., the Equal Employment Opportunity Commission continues to identify pay discrimination enforcement actions among its strategic priorities, and a number of states (e.g., California, Delaware, Oregon, etc.) have recently enacted more stringent laws aimed at achieving pay equality in the workplace. Alongside these legislative and enforcement efforts to curb pay discrimination, activist shareholder firms have begun pressuring public companies in the U.S. to address the gender pay gap by making shareholder proposals that, if passed, would require targeted companies to disclose pay information describing their female employees’ pay as a percentile of male employees’ compensation.
Activist firms, such as Arjuna Capital and Trillium Asset Management, have targeted numerous companies with shareholder proposals that would require disclosure of gender pay data in annual 14-A proxy statements. Overwhelmingly, these proposals have either failed (by a significant margin) or, increasingly, have been withdrawn before a formal shareholder vote has occurred. Such proposals often call for companies to conduct and publish data from diversity studies aimed at highlighting any variance in average pay earned by men and women, with or without consideration of differences in positions, experience, or other variables.
Proponents of these proposals often consider their efforts successful even where a proposal does not reach a vote so long as their efforts draw attention to pay-equity concerns and result in a targeted company taking responsive action (including bargaining with the activist firm for a withdrawal of its proposal). Negotiations concerning these activist shareholder proposals often implicate both securities law and employment law issues, as well as employee and public relations concerns. A firm facing a pay-equity shareholder proposal should adopt a legal strategy that accounts for all of these competing concerns.