It was so quiet that it almost passed me by: the announcement in October that, after losing an appeal, JPMorgan Chase is now facing a lawsuit from the US Labor Department for paying female employees less than men.
The dispute is to be decided by an administrative judge.
Although not widely reported, the case has been a thorn in JPMorgan’s side since it was approached by the Department in 2015 with findings that, since 2012, the bank had paid 93 women in four categories (including project management and technology) less than male colleagues in the same roles.
Seemingly, a correction was unforthcoming. According to the National Law Journal, the complaint seeks, among other things, an injunction barring JPMorgan from discriminating against female employees and demands lost pay and salary adjustments for the affected workers.
Jamie Dimon’s firm is not alone in getting slapped down for pay inequality. In October, State Street agreed to pay $5 million to settle allegations (again from the US Labor Department) that the bank underpaid its female and black executives compared with male and white employees in the same positions.
This intervention from the Department of Labor is a positive step towards pay equity in the financial services industry. Large institutions in particular have dug their heels in over revealing their internal pay gaps, let alone correcting them – although one imagines they may be trying to avoid the kind of big fines that usually accompany such transparency.
Arjuna Capital, which successfully negotiated and drew majority shareholder backing for proposals on pay disclosure at the large tech firms, last year filed for disclosure around the gender pay gap at the large US banks, including JPMorgan, Bank of America, Wells Fargo and Citi, as well as at credit card companies.
Over the 2017 proxy year, the proposals were supported by around 15% of shareholders (including backing from corporate governance firm Glass Lewis). As Arjuna refiles for this year, it is hoped that momentum to disclose will grow, particularly now that regulators are intervening.
Natasha Lamb, a managing partner at Arjuna, points out that investors cannot ignore the regulatory risk to companies over pay inequality.
Indeed, regulators seem to be throwing their weight behind the issue. From April this year, for example, UK employers with more than 250 employees were required to disclose the pay gap. They are being given until April 2018 to comply, though some UK financial institutions such as Virgin Money and Schroders have already made their disclosures.
It is comforting to see regulators consider pay equity to be important, because, as Arjuna’s experience over 2017 shows, institutional investors still need some convincing.
It was perhaps surprising that Institutional Shareholder Services (ISS) was not more supportive of Arjuna’s proposal, although one wonders to what extent it is influenced by having financial institutions as clients. Still, it will be hard for the proxy service to ignore its own research.
In October, 60% of institutional investors ISS surveyed said that US companies should be disclosing their gender pay gaps.
Regulatory risk aside, the financial services industry suffers from a perception of being unfair to women. Lamb points out that women are 20% to 30% more likely to leave the finance industry than any other to take on an entirely new career.
When the most powerful positions on Wall Street are predominantly held by men, it is no surprise that women feel the industry is unsupportive. I have yet to hear of one succession plan on Wall Street that points to having a female CEO anytime soon. And lawsuits help support what many argue is an “unproved” bias.
Denying the pay gap or avoiding talking about it just seems pointless. UBS and PwC’s annual billionaire report was released at the end of October – are we at all shocked to hear that of the 1,550 odd billionaires in US, Europe and Asia only some 170 are women?
I would have guessed it was even lower than 170, because as another UBS report, ‘Taking Action’, reveals, the pay gap adds up to a big wealth gap over a lifetime. What starts as a 10% difference in salary ends up with something like a 40% rift in wealth once a year off to have a child is factored in.
That wealth gap is even greater for women who also face barriers based on race, according to Arjuna. In the US for example, white women earn 80 cents for every dollar earned by white men, but for African American women that drops to 60c and for Latino women 50c. And women are not getting even, let alone ahead – the ratio of male to female billionaires has remained static over the last 30 years.