Finally, you can feel good about spending more at Target. The seventh-largest US retailer earned its first-ever A+ rating on an annual race and gender scorecard compiled by Arjuna Capital and Proxy Impact. The scorecard is in its sixth year of evaluating and ranking major U.S. companies on issues of equal pay through the lens of race and gender. In addition to Target, companies with an A rating include: Starbucks, Mastercard, Microsoft, Pfizer, Bank of New York Mellon, Citigroup, Adobe, American Express, Visa, Lowe’s, Best Buy, and Home Depot. Meanwhile, companies like Walmart, Google, Netflix and 22 others received an F rating.
In all, the 2023 scorecard evaluated 68 companies on quantitative measures of unadjusted and adjusted racial and gender wage disparities to create this ranking. It also assessed how each company calculates its pay data and adheres to pay transparency standards set in the UK. The UK mandated pay transparency for companies with 250 or more employees in 2018, and will continue to explore pay transparency for smaller organizations in 2023.
Other scorecard findings include rising and falling corporate stars. Compared to the 2022 ranking, 15 companies improve their scores, with Lowe’s and Best Buy making the biggest jump from an F to a B rating. This dramatic change is due to the fact that both companies have released extensive data on the median racial and gender wage gap. Meanwhile, Intel (D) and Google (F) scores fell due to failure to disclose quantitative wage differentials or methodology over the past two years, despite commitments to investors. In fact, the main reason for an F rating is a lack of pay transparency. While some companies are moving into the future, 18 of these companies remain on last year’s list of failed companies.
By industry, consumer companies are at the forefront of gender pay gap disclosure, representing 38% of companies that have awarded an “A” rating. Meanwhile, the healthcare sector lags furthest behind, with only Pfizer disclosing median wage differentials. Thermo Fisher has also committed to disclosing median differences this year. This assessment is particularly discouraging because health care has the third largest pay gap, after finance and insurance, and consulting. According to the Bureau of Labor Statistics, the lagging healthcare sector disproportionately affects women, who represent 76% of the healthcare workforce.
To further clarify the difference between unadjusted and adjusted pay gap, unadjusted pay gap means examining the median wage by gender or race without considering anything else. Adjusted gaps take into account job classification and other factors that often paint a better picture of equity specific to that narrow perspective. But the bigger problem is total equity. “Women and people of color are almost always deeply underrepresented in higher-paying positions,” said Michael Passoff, CEO of Proxy Impact and co-author of the scorecard. “Data on the average pay gap sheds light on that problem, and studies show that companies that disclose the pay gap are more likely to resolve it.” Thus, looking at both gaps gives us a better idea of the overall fairness of the organization.
The scorecard also examines coverage, which means that all employees’ wage data is examined globally and paid more than base salary. In addition, the scorecard includes a company’s commitment to review 100% of its global operations over time. Organizations also agree to an ongoing and annual review of pay equity. The full report also includes analysis by industry over time.
Target with an A+ rating is consistent with their commitment to a fully inclusive shopping experience, such as aisles dedicated to black hair care products produced by black companies. Natasha Lamb, managing partner of investment management firm Arjuna Capital and co-author of the scorecard, is encouraged by the continuous improvement of many companies. “Target’s score of A+ is really something to celebrate this Equal Pay Day,” she said via email. “The race and gender pay gap is structural and persistent, but the Scorecard holds back those companies that are doing the real and honest work of creating pay equality,” Lamb said. Other A-rated companies, such as Starbucks, Citibank, Mastercard and others, often have a long track record of leveling salaries and providing additional support to employees. Home Depot is also notable, as they announced a $1 billion investment in pay raises and other career development programs to retain and support staff.
But the larger work picture shows where progress still needs to be made. Women and people of color continue to gain from jobs lost during the pandemic, but they still haven’t fully closed the gap. According to US Census Bureau data, women who work full-time earn, on average, only 84% of the wages their white male counterparts earn. The pay gap is wider for women of color. The American Association of University Women breaks down those differences: On average, Native American and Latina women make 57%, Black women 67%. Asian American, Native Hawaiian and Pacific Islander women are a group that earn up to 80% of the wages of their male counterparts, but still fall behind.
Aside from bragging rights to the organization, what impact do these scorecard ratings really have? A big one, when it comes to employee experience. “Public reviews often validate employee experience, making it known to people outside the organization how a workplace values the employee,” said Benish Shah, a tech executive and expert on workplace design, via email. Fully public approaches to pay fairly also impact recruitment. “In the past, companies have relied on fringe benefits and high salaries to attract strong talent, but talent is becoming more specific about the type of organization they want to work for,” said Shah.
Latesha Byrd agrees. She is the CEO of Perfeqta, a talent development agency and expert on diversity, equality and inclusion. “People want to work for organizations they can trust. Payment transparency is a great way to build that trust and create a culture in the workplace where employees feel they belong,” she noted via email. She is encouraged by the scorecard results. “Target’s perfect rating proves that fairness and transparency go hand in hand. Companies that keep track of this data, take responsibility for wage disparities, and work to rectify any disparities are the companies that will retain diverse talent,” Byrd said. Both Byrd and Shah agree that being fearless about sharing wage data is just can help win the hearts, minds and loyalty of top talent.