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Is it a gender representation issue or a gender pay gap issue? A study of the replaced executives in the USA

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  • Rama K. Malladi

    (California State University)

  • Joshua D. Mean

    (California State University)

Abstract

The gender pay gap is one of the central themes of inequality in the workplace and remains at the heart of the political and social debate. Almost all prior executive pay studies focus on a geographic region or industry to uncover gender pay differences. Since firms differ in size and industry, prior studies used diverse conditional variables to deal with the heterogeneity issues. We use a new approach, executive replacement, to analyze the gender pay gap. Since we study the pay gap in the same firm, most heterogeneity issues disappear. We examine if the gender pay gap exists at the executive level when someone from the opposite sex replace an executive. We use a large sample of 4532 publicly traded firms and 302,729 annual pay observations spanning over 25 years (1992 to 2019). We find that a significant difference in total compensation for female CEOs (compared to male CEOs) does not exist at the aggregate level. However, the 'twenty-percent pay gap' does exist during executive turnover. Our results indicate that female executives face a representation problem, not a compensation discrimination problem. Moreover, evidence suggests that female CEOs are swiftly replaced when a company's stock performance suffers. Female CEOs turn around the company's sagging stock performance better than male CEOs.

Suggested Citation

  • Rama K. Malladi & Joshua D. Mean, 2021. "Is it a gender representation issue or a gender pay gap issue? A study of the replaced executives in the USA," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(2), pages 67-80, April.
    • Handle: RePEc:pal:buseco:v:56:y:2021:i:2:d:10.1057_s11369-021-00208-5
    DOI: 10.1057/s11369-021-00208-5
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    References listed on IDEAS

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    More about this item

    Keywords

    CEO; CFO; Executive gender pay gap; Gender equity; Representation gap; Compensation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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