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CEO's pay raises questions about gender discrimination

The difference in compensation between the new CEO of General Motors and her predecessor has made headlines recently as questions have been raised about whether the new CEO is being paid less because she is a woman.

The disparity is found in the difference between yearly salary and long-term incentives. In the case of the previous CEO of General Motors, the yearly salary was quite high. In the case of the current CEO, Ms. Barra, General Motors sources say that her long term incentives are much greater than her predecessors and over time she will earn more than he did. A key aspect is that unlike her predecessor, her payment will be tied to how the company performs financially.

While the company argues that this means she is earning a similar amount to her peers, critics point out that the previous CEO was paid a high sum regardless of how the company did. Some would say this is a perfect embodiment of the harsher standard placed on women executives who must outperform their male peers to rise to the same position and pay.

The truth is that nearly all executives receive bonuses tied to corporate earnings, often within a graduated structure depending on their level within the company. However, base salary can vary widely depending on many factors such as seniority, experience, and past performance. In this case, Ms. Barra has been with the company for over three decades whereas her predecessor had no direct experience in the automotive industry at the time he took the job. This fact has raised some eyebrows about why Ms. Barra’s base starting salary is so much less.

Paying someone less based on their gender is illegal, so if her pay is lower directly or indirectly because of her gender, then the company could be liable for discrimination.

Source: Christian Science Monitor, “Gender pay gap: GM defends compensation package for CEO Mary Barra,” Mark Guarino, Feb. 11, 2014.

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