Business leaders do some unexpected things from time to time. T-Mobile US boss John Legere once paid $21,800 on eBay for the right to put a temporary tattoo on an Olympic runner's arm.
Goldman Sachs chief executive Lloyd Blankfein suddenly took up tweeting. Mike Ashley, the UK sportswear tycoon, vomited into a fireplace after a drinking contest, a court thrillingly heard last year.
Yet last week, the head of one of Europe's largest airlines did something far more remarkable. He took a £34,000 (€38,500) pay cut in the name of gender equality. Johan Lundgren, chief executive at UK-based EasyJet, asked the board to reduce his £740,000 salary to £706,000 so it matched that of his predecessor, Carolyn McCall, saying he wanted to "show my personal commitment" to equal pay.
It is easy to sniff at such a meagre sacrifice, except for two things: its timing and the precedent it sets.
As soon as I read of Mr Lundgren's move, I emailed several pay experts to see if they had heard of anything like it before. "This is not something we have seen," said Russell Reynolds, the City of London recruiter. "I have never heard of this ever," said another City veteran. The Association of Professional Staffing Companies also drew a blank.
Reporting requirement
At another time, Mr Lundgren’s move could be brushed aside as a one-off or an inspired piece of PR. Yet EasyJet is one of about 9,000 employers with 250 or more workers required by UK law to report their gender pay gaps by April 4th. We do not know how companies are going to respond to this. What we do know is that once a pay gap is published, the consequences can be surprising.
Mr Lundgren’s move came days after the BBC revealed six of its top male presenters had agreed to cut their pay as managers grappled with an ongoing outcry over the public broadcaster’s gender pay disparity. The trouble began in July when the BBC – forever taking flak for overpaying presenters – was forced to publish a list of some of its highest-earning stars.
A furore erupted, but it was over gender pay gaps, not overpayment, because only about a third on the list were women and the top seven were all men. It also exposed gaping differences in the salaries of presenters on the same programmes. Managers are still trying to contain the fallout, and were hauled before MPs in Westminster to explain the disparities last week.
The BBC is of course different from many of the employers due to report in April. A publicly funded outfit, it had to name its stars. Companies will not have to do this. But the broadcaster has also decided that one of its solutions to closing its gap will be “substantial pay cuts for some men”.
Pay gaps build up when companies spend years hiring men on good pay who stick around while women leave
I am far from immune to the pleasure of seeing any stratospherically-paid person, male or female, take a cut if the size of their salary is baffling. But the idea that this is a problem that can be readily solved by lopping men’s pay is worrying on several counts.
Divisive
It might be eye-catching, but it is also divisive. It may be affordable for EasyJet's Mr Lundgren and the BBC stars. They include veteran presenter John Humphrys who earned between £600,000 and £649,999 in 2016-2017. But what of men lower down the pay grades? Where does one draw the line? Should today's workers pay for the mistakes of past managers?
Ultimately, this is a problem that requires a lot of tedious, hard work. UK women earn on average 18 per cent less than men – or 9 per cent if only full-time workers are counted.
Fixing this requires serious management effort, especially in industries long dominated by men. EasyJet is a classic example. It has a 51.7 per cent gap thanks to what it calls “the massive gender imbalance” in its pilots, 94 per cent of whom are men.
The company wants 20 per cent of new pilots to be female by 2020 – and that matters. Pay gaps build up when companies spend years hiring men on good pay who stick around while women leave. Shared parental leave and other flexible working arrangements can help. So can annual equal pay audits and a host of other measures. Thousands of companies have avoided this in the past. After April 4th, I suspect many will wish they had acted sooner.
Some will no doubt have to do something they should have done long ago: pay women more. – Copyright The Financial Times Limited 2018
