Today I’d like to share my thoughts on a topic that Facebook COO Sheryl Sanderg has once again brought to the forefront of public consciousness in her book Lean In: Women, Work, and the Will to Lead. In the book, Sandberg examines why – when compared against men – women occupy a disproportionately (controlling for education, career choice etc.) small number of corporate leadership roles.
The book elaborates on a number of the root causes behind women’s under-representation in the executive ranks, but in this post I want to focus on the role of work-life balance and its function in preventing women from occupying as many leadership roles as their male counterparts.
Sandberg’s book has drawn very strong reactions – some positive and some negative – on this front. The principle criticism seems to be that women are being called on to juggle the impossible demands of work and family life, and that in her book Sandberg doesn’t put enough onus on the employer to figure out ways to mitigate these challenges (in the form of child care/flex schedules etc.). Some common criticisms of the book are:
Jodi Kantor of the New York Times suggested that Sandberg “places too much of the onus on women who are already struggling to fulfill impossible demands, and too little on government and employers to provide better child care, more flexible jobs and other concrete gains.” Deanna Zandt wrote in Forbes: “I’m all for assertiveness training…. But without simultaneously taking on the structures that keep those norms in place, women are…helping to reproduce [them].”
I personally disagree with the above critiques. More specifically, it isn’t the role of the employer to develop a flexible schedule – for men or women – to accommodate families and work/life needs. Businesses can utilize these perks as part of their talent attraction and retention strategies if they choose, but the needs of a firm will always fundamentally bleed into the personal/family time of any employees that move far enough up the corporate ranks – that’s1. And executives are compensated handsomely for that time.just the way it goes. 1
There are some good questions around if women (on average) with children even want to work the insane hours executives typically work. There are also some very good questions around if 60 hour work weeks are even needed to get work done at the C-Suite level. 22. There really might be a way for executives – men and women both – to “have it all” from a work-life balance standpoint if we rethink the way that we work. This change brings with it some accountability/span of control issues that would likely dramatically impact executive compensation, but the WSJ does make some good points in their article on the subject. I don’t know how flexible companies can make C-Suite level positions (it varies by business), or what their economic incentives would be to do so (again, it depends on the firm), but the compensation questions around it fascinate me. Topic for another day…
Regardless, I don’t think the challenge of creating gender equality at the executive level falls on corporations to solve – I think it lies with society itself. As a society, we have to find a way to address cultural norms around gender roles.
It’s more difficult for women to get ahead in corporate America than men because they (typically) shoulder the majority of child rearing and household
duties/responsibilities. I’m all for couples making the decision to have one partner or the other run the household/focus on the childcare while the other focuses on his/her career if that’s a choice they make together (though it may not be the best idea), but in the majority of American households, today women are often assigned the household/child-rearing duties by default.
Ultimately, we live in a global economy, and any multinational business’s operational needs are going to come before the work-life balance needs of its executives. What I think U.S. society can do a better job of, however, is raising male and female children that are equally capable of thinking about pursuing careers as high flying executives or part-time workers (when their children are young) or even stay at home parents.
Right now the deck is stacked against women for cultural reasons – when women have children it is almost always the woman’s career that stalls as opposed to that of her partner. This is something society needs to address.
…And who knows… if we really do achieve gender equality around household duties and responsibilities then the workplace may shift to reflect this as well (or maybe C-Suites will just be full of single people).
This is a tough topic with no easy answers. If you have any ideas around how to address this challenge please share your thoughts in the comments section below.
The median CEO in the United States earns 354 times the median income of the median worker.
Is this a problem?
A year ago I would have told you no.
Lately, however, with legislation passing in various countries throughout Europe giving shareholders binding say on executive pay and non-binding say on pay legislation passing throughout the U.S. I’m starting to change my mind.
1. Further, as someone who is a huge believer in the individual finding a way to maximize his earnings if he feels he is worth more, I typically get a little annoyed when I hear someone complaining about the earnings of others (CEO or otherwise). Companies should do their best to maintain pay equity within jobs (for both legal and employee engagement reasons), but the market is generally getting pretty efficient at paying for talent. The growth of social media has made it easy for recruiters to find even the most passive candidates. As such, if an employee is underpaid it isn’t difficult for him to go out into the market and get a more competitive job offer… and as the economy improves it will get easier still.I don’t care about what others make. 1 Many people do, though. And there is a lot of evidence that when income inequality reaches a certain point it can lead to social and political unrest.
I’ve talked before about why executive compensation packages are as large as they are (and why the ratio is growing). The market for executive talent is fundamentally different than the market for talent in the rest of the workforce (in the same way that the real estate market in NY City is fundamentally different than the real estate market in rural Illinois). This won’t change anytime soon for a variety of reasons, but lately I’m wondering if those reasons will be good enough for the general public.
What do you think? Are executive pay practices in the United States going to be forced to change due to social, political and cultural pressure, or will the improving economy and rising employment numbers cause this issue to fade away?
Further, as someone who is a huge believer in the individual finding a way to maximize his earnings if he feels he is worth more, I typically get a little annoyed when I hear someone complaining about the earnings of others (CEO or otherwise). Companies should do their best to maintain pay equity within jobs (for both legal and employee engagement reasons), but the market is generally getting pretty efficient at paying for talent. The growth of social media has made it easy for recruiters to find even the most passive candidates. As such, if an employee is underpaid it isn’t difficult for him to go out into the market and get a more competitive job offer… and as the economy improves it will get easier still.
Okay, this is a fun topic (for me at least) that I’m going to *try* to tackle in1. It’s 4 am here and I need to be done with this by 5:00 am latest. I’ve been asleep for the past 13 hours. I was exhausted and needed the rest (which was great, but it brought me dangerously close to not shipping today). the next hour or so. 1
Okay, so we need to answer two questions (and sub questions) and then I will wrap up by sharing my thoughts here.
1. What is target/realizable/realized pay?
A. Let’s start with target pay. Really simply put, it’s the annual base pay, short term incentive opportunity (i.e. bonus), and long term incentive opportunity (mostly equity valued at grant date).
B. Realizable pay is annual base pay, short term incentive opportunity (i.e. bonus), vested equity, and finally “in the money” value of2. I am not crazy about realized pay as a measure of how executive pay aligns with performance because executives can exercise stock options whenever they want – which makes using this valuation as an actual indicator of earned wealth slightly flawed. One wouldn’t say Mark Zuckerberg (Facebook) or Bill Gates aren’t billionaires because they haven’t cashed out the shares they own. This is of course not an apples to apples comparison – their shares have value regardless of when they are cashed out (as long as the company the shares are for doesn’t go bankrupt) – while stock options only have value if they are exercised while the share price is above that at grant date. With that said, once an option is exercisable and “in the money” then as far as I’m concerned it’s earned wealth. The executive simply hasn’t been taxed on it yet.outstanding/unvested equity. 2
C. Realized pay is something that everyone will explain in a slightly different way, but for the purposes of our discussion I’ll say that realized pay is broadly defined as the pay that shows up in your W2 – what you actually earned in a given year. There are some slight differences, but it’s the best definition anyone ever gave me and the numbers line up remarkably well for most companies.
2. Why does this matter?
It matters because the modern regulatory environment has made this a hot button issue. Corporate boards are spending a great deal of time, money and energy to align pay with performance not only to to maximize shareholder value, but also to stay compliant with government legislation. Unfortunately this data isn’t really being shared in an easily digestible, accurate way in proxy statements right now (the summary comp table is a mess – more on that in a moment), which basically leaves shareholders confused around what companies are actually paying their executives and how this aligns pay with performance. These alternative pay disclosures are a way for companies to more clearly communicate their executive compensation strategy to shareholders so that they can make an informed decision when casting their say on pay votes.
I say that this stuff doesn’t matter a lot of the time – largely because a CEO’s pay package is such a negligible expense for most mid+ cap companies – but it3. I tend to exaggerate when making a point. The why might make an interesting post if I can ever tie it back to HR. actually does. 3 It matters if for no other reason than the fact that the CEO plays a huge role in setting the strategy for the company… and the pay mix/incentives play a huge role in how a CEO sets the strategy.
I am running short on time, so I want to close by sharing this great table from the Center on Executive Compensation illustrating the problems with the summary comp table (which is the current, SEC-mandated tool via which companies must disclose executive pay in the U.S.):
…So there are obviously a lot of problems here, but we’ve got what we’ve got. The big question is what alternative disclosures make the most sense to use and when. The Center on Executive Compensation has a great article on this entitled “The Roles of Realized and Realizable Pay in Disclosing Pay for Performance – A Discussion and Conceptual Framework” (March 2013). Fantastic read.
I don’t know which of these makes the most sense to use as a standard measure in alternate disclosure forms going forward. There are some very challenging questions around each methodology.
As stated in my footer (yes, I’m citing my footer) 2 earlier, realized pay has some problems because it doesn’t include options that are already vested unless the executive exercises them (in the process understating how much the executive has actually earned). Conversely, realizable pay isn’t really measuring how executive pay aligns with TSR either, as it includes the value of outstanding equity which is of course contingent on future performance… ergo the executive may or may not get it. Finally, target pay isn’t much better than the SCT (it’s slightly better since it at least doesn’t include pension value… which has nothing to do with performance).
Today I want to share a guest blog post I wrote for Spark Hire. They’re a great
1. I think more companies should be utilizing video interviews in their sourcing process (for both cost and engagement reasons – great post for another day).company that specializes in video interviewing, 1 and I’ve enjoyed reading their content the past several months.
Read it at Spark Hire here:
Hiring “Rock Star” Talent is Not Always Best Practice (Spark Hire)
Today I want to talk about a common problem faced by businesses (and by extension1. I’m actually in the process of a move. I’m sitting on the floor writing this (the furniture is all gone) and it all has me feeling vaguely whimsical. Let’s see where this takes us.compensation functions): 1
When managing its compensation structure, how should an organization account for the fact that some functions add more value to the business than others?
This is a fundamentally different question than figuring out how to reward a contributor dramatically outperforming one’s peers in the same job (higher merit increases and pay adjustments will create separation over time). It’s also different than valuating a specific job particularly highly (if a skill set is hot then the market will set the rate as a product of supply and demand).
The question I’m posing is around the challenge of addressing the fact that in a hypothetical widget sales organization, the widget salespeople may materially2. This sort of problem is a common one in many organizations, but I like using widget analogies so let’s go with this tonight. generate more value for the business than the operations people (as an example – it could just as easily be the other way around in a product-focused company).
This doesn’t mean that the skill set the salespeople have is more valuable in the overall external market than are those of the operations people in the organization (they may or may not be), nor that the skill set is harder to learn/develop. In fact, let us instead assume in this analogy that the widget salespeople only have more value than their operations counterparts internally.
Should the sales people be paid more? Depending on if you believe in internal based pay models or market based pay models your answer may vary.
…But what if an individual contributor within a function generates more money for the business than his or her manager? Should that employee have a higher base salary? If his or her commissions causes a dramatic pay disparity between he/she and the manager, should said commissions be capped at a certain percentage?
A company could choose to leave the commissions uncapped, but it might then find it can’t attract individual contributors into the management ranks because the pay hit is too significant.
…Of course, this may not be a bad thing. There is an argument to be made that the historical tool used to reward top individual contributors (moving them into management) is a deeply flawed way of selecting managers (just because one is a good doer doesn’t mean he or she is a good manager). Even if this is the case, however, the fact remains that if managers make a fraction of the pay of the employees they’re managing and aren’t selected based on their performance as individual contributors there is a real danger that said managers lack the credibility with their reports to lead them.
I don’t know what makes the most sense here – as always, it mostly depends. The topic has been on my mind lately, however, and I wanted to share some quick thoughts with you tonight.
Today was my last day in compensation. I’m stepping into a new role (internally) that will take me to both a new city and new role.
As such, this week has been unusually hard to ship for me. Crazy hours… juggling a move. It’s just been one of those weeks where its been challenging to stay in front of things.
With that said, when time gets scarce you learn what’s really important. 1 It narrows your focus. You prioritize and focus on doing the things you really need to do.
Because of the last week I am better today than I was before.
…I think that’s the lesson today.
Look to push yourself every once in a while. Narrow your focus – find out what really matters.
You’ll be better for it. You’ll understand what you need to be at your best and what you can afford to let go.
Of course, I’m just making it up as I go along.
I’m writing from my phone today. 1 I’ve moved to another state as part of a new assignment, and my internet provider hasn’t been able to get my connection set up quite yet.
This in and of itself isn’t noteworthy (same day install seems relatively uncommon for internet and cable service), but what *is* noteworthy is that when I called today to order service the company seemed to be in chaos. Customer service reps gave conflicting information around service set up and pricing, there were systems issues, and at one point a rep said she would send confirmation of my order within 45 minutes only to never send anything or return my call.
I called the company back and spoke to two different agents before getting to the heart of the problem – they were in the middle of a merger and no one knew right from left.
This got me thinking about change management during an acquistion and the unique role HR plays in the process. Bringing two companies together involves addressing cultural issues around the way work gets done, and companies that fail to lay the proper foundation here will run into a host of integration challenges like the ones being faced by the (unamed for their benefit) cable company today.
That’s all I dare write on this subject from my phone, but I’ll look to revisit this going forward.