One Woman is Ruining Executive Compensation

Stickman Nooyi ruined Exex Pay.png

One Woman is Ruining Executive Compensation

The headline may be a bit hyperbolic, but it’s not completely wrong.  Indra Nooyi, the CEO at Pepsi for the past 12 years, is stepping down in October 2018. Ms. Nooyi has been amongst the top three highest-paid female CEOs for many years.  She has regularly been in the top 10 list of all CEOs. She was a great anchor in the narrative about women being treated more fairly in recent years. But, her departure makes the feel-good story much harder to feel good about.

With her gone, the number of women in the top 100 has shrunk by 11%. That’s right, there were only 9 women in the top 100. Her pay represented 16% of all the compensation the same group. With her absence, we must once again face the fact that we have not “fixed women in executive positions.”

Ms. Nooyi is kind of ruining it for the gender equity crowd. The following headline that ran with another USA Today article, from May 25, 2018, based on data from 2017.

“Women CEOs still a rarity, but pay tops that of men”

At the time, Ms. Nooyi was the highest paid female CEO in the country, making more than $25.9M. Now we not only need to get another woman into the top 100, but we also need to pay one of them enough money to keep the average pay above the men! I know some people would suggest that we simply hire more women and pay them equitably, but maybe that’s just crazy talk. Could there possibly be enough qualified women to fill even half of the CEO roles? (yes…the answer to the prior question is obviously yes.)

I have always told my clients that the pay programs at their company will work just about as well as the CEO believes in them. I also think that gender equity and equity across diversity, in general, will become a non-issue only after the problem has been fixed at the top levels. The loss of Ms. Nooyi should be a call for action in the quest for fixing one of the most pervasive systemic problems facing all companies.

As compensation professionals, all we can actively do is provide data and guidance with a blind eye. But, we can also be a reminder of the opportunity each company has to fix this issue at any time they wish. There is no rule that says we must wait until next year.  There is no reason that, with every new CEO hired or promoted, this situation can’t improve. Done with simple intent without upheaval this issue can be corrected over several years, and certainly less than a decade.

Until then we have to put the blame on Indra Nooyi. It’s her fault we must once again admit our flaws. How could she do this to us? I’d love to hear if this is even a topic of conversation at your company.

(Sarcasm often translates poorly in written form. So, to be clear, this article is meant to bring attention to the fact that there are so few female CEOs, that even one leaving the ranks has a material impact. It is time businesses fix this problem.)

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