Pay-gap report proposal garners support at P&G

Around three in 10 investor votes last week backed a proposal seeking disclosure on pay equity at Procter & Gamble (P&G).

The proposal, filed by Arjuna Capital, asked the company to report ‘on both quantitative median and adjusted pay gaps across race and gender, including associated policy, reputational, competitive and operational risks, and risks related to recruiting and retaining diverse talent.’ It defines racial/gender pay gaps as the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings.

In a supporting statement, Arjuna said the report could, at the board’s discretion, integrate base, bonus and equity compensation to calculate:

• The percentage median gender pay gap, globally and/or by country, where appropriate
• The percentage median racial/minority/ethnicity pay gap in the US and/or by country, where appropriate.

The resolution was backed by 30 percent of votes cast at the October 8 AGM, a level of support governance experts generally regard as significant despite not being a majority.

‘Pay inequities persist across race and gender and pose substantial risks to companies and society at large,’ Arjuna wrote in its filing. ‘Black workers’ hourly median earnings represent 81 percent of white wages. The median income for women working full time is 84 percent that of men…

‘Actively managing pay equity is associated with improved representation, and diversity is linked to superior stock performance and return on equity. Minorities represent 28 percent of [P&G’s] workforce and 32 percent of executive leadership. Women represent 41 percent of the workforce and 41 percent of executive leadership.’

The asset manager said best practice pay equity reporting consists of:

• Unadjusted median pay gaps, assessing equal opportunity to high-paying roles
• Statistically adjusted gaps, assessing pay between minorities and non-minorities, men and women, performing similar roles.

‘[P&G] does not currently report quantitative unadjusted or adjusted gaps,’ Arjuna wrote. ‘About 50 percent of the 100 largest US companies are committed to reporting quantitative adjusted gaps and an increasing number of companies disclose unadjusted gaps to address the structural bias women and minorities face regarding job opportunity and pay.’

Board opposition
P&G’s board had urged shareholders to vote against the proposal, writing in the company’s 2024 proxy statement: ‘We know that equality and inclusion is good for business – broadening market reach and driving market growth. Simply put, it helps us win. Our efforts to attract, develop and retain the best employees from the broadest pool of talent helps us better serve an increasingly diverse set of consumers. Among P&G employees, we have made substantive progress toward our long-term aspirations of achieving equal representation of men and women throughout our company and levels of multicultural representation that reflect the consumers we serve in the US… Fair pay is consistent with these efforts for our employees at all levels.’

The board stated: ‘The ‘unadjusted gap’ or ‘median gap’ proposed in this resolution does not consider legitimate factors that influence compensation (job level, performance, job-related skills, experience, and so on) and, as a result, it does not accurately reflect whether employees are being equitably paid and does not provide any meaningful or actionable information about compensation practices or policies.’

The board also argued that Arjuna does not recognize ‘the depth of P&G’s existing reporting, which affords investors with meaningful opportunity to assess and understand [the company’s] progress. Our reporting is consistent with our [equality and inclusion strategy] and strikes a reasonable balance between action that drives meaningful change and reporting.’

A request for comment from the company was not returned immediately.