In a February 1, 2016 comment letter to the Securities and Exchange Commission (“SEC”), Pax Ellevate Management LLC Chair Sallie Krawcheck and Chief Executive Officer Joseph F. Keefe requested that the SEC take steps to require companies to annually disclose gender pay ratio information to investors. In the alternative, Krawcheck and Keefe requested that the SEC provide guidance to companies to encourage voluntary reporting on pay equity. (Pax Ellevate Management LLC is investment advisor to the Pax Ellevate Global Women’s Index Fund (PXWEX), which focuses on investments in companies rated highly in advancing women’s leadership.)
Krawcheck and Keefe stated that they view “gender pay inequality as a material risk to investors,” citing the time and cost involved in defending against gender discrimination lawsuits. They further stated that they “believe that the materiality of gender pay ratios clearly falls within the definition of materiality” set forth in the SEC’s Staff Accounting Bulletin No. 99, defining a matter as “material” if “there is a substantial likelihood that a reasonable person would consider it important.”
Krawcheck and Keefe’s comment letter follows the SEC’s August 2015 adoption of a final rule requiring public companies to disclose the ratio of chief executive officer compensation to that of the median for their employees, as mandated by Dodd-Frank. In their comment letter, Krawcheck and Keefe state that “[t]he new SEC rule on pay ratio disclosure already obliges companies to collect the data that would be needed to report gender pay ratios, thus alleviating any burden associated with additional data collection.”
While the SEC has thus far declined comment on the letter, it is yet a further example of gender pay equity rising to the forefront of issues of which employers must remain attentive. In January of this year, the EEOC announced a proposed revision to the Employer Information Report (EEO-1) to include the collection of pay data from employers (including federal contractors) with more than 100 employees in order to “assist the agency in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.” In addition, new equal pay laws went into effect in New York and California in 2016, and in March of this year the New Jersey Senate passed proposed equal pay legislation that would, among other provisions, restart the statute of limitations each time a discriminatory paycheck is issued to the employee—similar to the federal Lily Ledbetter Fair Pay Act—and allow back pay for the entire violation period.