A DEA study of gender equity in executive compensation
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A DEA study of gender equity in executive compensation WF Bowlin1,*, CJ Renner2 and JM Rives1 1
University of Northern Iowa, IA, USA; and 2Boise State University, ID, USA
This study assesses whether annual and long-term compensation for senior executive women is equal to annual and long-term compensation for senior executive men. The group of executive women includes those women reported in the compensation tables of proxy statements for the companies in the Standard and Poors (S&P) 500 for 1997. Their compensation was compared to the compensation for two samples of executive men from S&P 500 firms using data envelopment analysis. The results indicate that the compensation paid to executive women is equitable to the compensation paid to executive men. Journal of the Operational Research Society (2003) 54, 751–757. doi:10.1057/palgrave.jors.2601555 Keywords: executive compensation; data envelopment analysis; gender equity
Introduction Over the past several years, the popular press and research studies have discussed gender differences in pay. Blau and Kahn1 presented Bureau of Labor Statistics figures showing that the female-to-male ratio of median weekly earnings of full-time workers, which was 64.2 percent in both 1967 and 1979, rose to 74 percent by 1991. Catalyst2 reported that the gender pay gap among top corporate executives was significant with women executives earning only 68 percent of the compensation paid their male counterparts. However, Renner et al3 and Bertrand and Hallo4 concluded that company performance and size characteristics explain most of the variation between men and women in executive pay. The current study attempts to replicate the Renner et al3 and Bertand and Hallo4 findings using a different methodology, namely, data envelopment analysis (DEA). When dealing with public or social policy issues such as whether executive women are paid less than executive men, it is important that the same results can be replicated using a different methodology in order to gain more confidence in them. Different methodologies have different characteristics and different assumptions, which may lead to different results. For example, in researching the breakup of the Bell System, Charnes et al,5 using a goal programming and constrained regression research approach, reached a different conclusion than did Evans and Heckman,6 who used a regression approach. If different methodologies result in the same conclusions, then policy makers can be more confident in basing public policy on these results. If different methodologies result in different conclusions, then addi*Correspondence: WF Bowlin, Department of Accounting, University of Northern Iowa, Cedar Falls, IA 50614-01217, USA.
tional research should be undertaken before establishing public policy. As noted above, in addition to gender, other factors such as corporate performance and size influence compensation. The economic theories of compensation (ie
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