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Pay equity is a prerogative every investor should advance

17 September 2021 Old Mutual Unit Trusts

When the UN General Assembly established International Equal Pay Day in 2019, they couldn’t have foretold the looming outbreak of Covid-19 a few months later, let alone the devastating impact it would have on the economic standing of women globally. Indeed, the status of women was deeply troubling even before the pandemic, with South African women shouldering household responsibilities as well as unemployment. This has been exacerbated in instances where the bread winner has passed away from Covid and women have been left to care for the financial needs of the household.

Elize Botha, Managing Director, Old Mutual Unit Trusts, says “the scarcity of employment opportunities in South Africa means women are particularly vulnerable to unfair pay practices, leaving them with little to no recourse to rectify this situation”.

According to the International Labour Organization median pay gaps between men and women based on hourly and monthly wages were 28.8% and 30.3%, respectively, well above the average global gap of 20%. More recently, the Old Mutual Savings & Investments Monitor 2021 (OMSIM) found that more women (37%) than men (32%) fell behind in paying their household bills amid the financial pressure brought about by the pandemic.

“When looking at this information side by side, it is hard to ignore the connection between pay inequality and the financial vulnerability of women, yet South African women are the primary caregivers,” says Botha, referring to the OMSIM finding that 48.2% of female-headed households provide support to members of their extended family relative to 23.1% of men.

As we commemorate the second annual International Equal Pay Day this year, Botha says South African investors need to start taking the issue of pay discrimination more seriously and proactively participate in dismantling the structures that sustain it.

“One way to do this is to engage in the growing conversation around ESG (environmental, social, and governance) investing and utilise the influence that comes with being a shareholder, which I think too many investors underestimate. Pay equity is a prerogative that every investor should advance.”

For example, by being more rigorous in selecting the companies they invest in (i.e. businesses with a visible and verifiable commitment to good governance, the health of the environment and the improvement of society), Botha says investors can invest in the shifts South Africa needs to see and relegate to the sidelines those companies that aren’t positively impacting our society.

Botha goes on to say that “the case for equal pay – which straddles the ‘s’ and the ‘g’ of ESG – is part of a broader conversation concerning the perceived value of women’s work and our underrepresentation on boards and in senior/ executive positions, which, research confirms, can undermine the profit potential of a business”.

The 2020 McKinsey and Company Diversity Wins Report found that companies on the top quartile in board gender diversity are 28% more likely to outperform their less diverse peers. The report further states that “female CEOs saw more value appreciation and improved stock price momentum for their firms; whereas female CFOs drove more value appreciation, better-defended profitability moats, and delivered excess risk-adjusted returns for their firms”.

According to Botha, the issue is so significant that global asset management firms such as Morgan Stanley, State Street, and BlackRock (among others) have publicly stated that they will invest only in companies that meet various targets relating to gender representation. While some progress has been made in redressing gender inequality, it is imperative that governments implement policies aimed at greater access to the job market, job security, and equitable employment benefits for women.

In making its plea to the international community to expedite global efforts to ensure equal pay for work of equal value, the UN General Assembly called on the support of several stakeholders.

In this regard, “it is crucial that investors see themselves as stakeholders bearing the responsibility of protecting not only their investments but also the individuals, workforces and communities driving the returns thereof, for a better sustainable future” concludes Botha.

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