For the C-Suite, Rising Compensation and a Widening Gender Gap
Let’s start on a higher note before diving headlong into the bad news: 2014 was pretty good to executives overall. According to the Association of Executive Search Consultant’s (AESC) BlueSteps Executive Compensation Report, most of them saw a rise in total compensation last year, with forty-four percent of CEOs/presidents, 62 percent of non-CEO C-level executives, 65 percent of executive vice presidents/senior vice presidents/vice presidents, and 66 percent of directors/executives all reporting an increase in their total compensation.
Julia Salem, senior marketing manager for AESC, attributes these increases to a healthier economy and the implementation of pay-for-performance models of compensation: “Pay for performance is a major trend that’s driving this compensation rise. Being that many companies are coming out of the recession now and seeing increased profits, we thought this is consistent with that current state of these companies: as they’re emerging from the recession, their revenues are going up … and the executives are being rewarded accordingly.”
Ben Ashwell, senior publications manager for AESC, agrees: “Since the recession, there’s been a bit of soul-searching around rewards and how we compensate out executives, so tying that to positive performance distinguishes the pay that people in the executive ranks receive compared to people earlier in their career or lower down in the organization. I think that’s a trend that we’ll see continue as people link pay to performance, so that we don’t get the kind of inflammatory environment that we saw around 2008, 2009, and 2010.”
Salem and Ashwell also point out that companies have grown more willing to pay a premium for top executive talent, noting that executive search revenues grew by 8.6 percent. More businesses are shelling out the money to hunt down the best executives they can find and keep those executives around. “We see that executive searching is up, and hiring is up, so that’s also cause for salary increases,” Salem says.
Above $250,000, the Gender Pay Gap Widens
Unfortunately, 2014 was not all sunshine and daisies: while the AESC found that most executives saw their total compensation rise, the association also found that female executives reported significantly lower compensation gains, especially above the $250,000 base-salary level.
Between the $100,000 and $250,000 base-salary levels, male and female executives were relatively evenly distributed. However, the pay gap widens significantly above the $250,000 level: 32.2 percent of male executives earned a base salary of more than $250,000, whereas only 22.2 percent of female executives were represented in those upper echelons.
Male and female executives also saw a disparity between their bonuses: the average male executive earned a cash bonus of $75,468, while the average female executive earned a bonus of $54,138.
“It shouldn’t be news that more can be done to promote gender diversity in the executive ranks,” Ashwell says. “But really what this survey represents is that, once you get past a certain level, that’s really where the gender gap begins to open up. I think that, effectively, what that indicates is the amount of female executives at that level begin to thin out, compared with the number of male executives.”
Ashwell and Salem both note that diversity in executive ranks “is important and essential to business performance,” but they also know that companies and executive search firms can’t make diversity happen overnight.
“By the very nature of executive search, you have to present the best possible candidates to your client,” Ashwell says. “[Executive search firms] have an obligation to their clients to find that suitable talent, so they can’t make things up.”
That being said, Ashwell also believes that the best executive search firms are those that find ways to broaden the talent pool. “The great executive search firms try to find new places and new ways to identify bright talent that would match the needs of the client,” he says.
In this way, executive search firms can play a role in closing the C-suite gender pay gap: not by offering female candidates for the sake of offering female candidates, but in working to locate women who are highly qualified for C-level jobs, even if that means looking outside of their usual sources.
Ultimately, Ashwell and Salem are both optimistic about the future of female executives.
“I think, over time, you’ll probably see that gender gap close at the senior level. The leaky talent pipeline is beginning to fix itself. There’s a lot of great work being done in that space, and that’s really where executive search firms can really benefit from that work by helping to align the best talent with their clients,” Ashwell says.