Editor's note: This article is part of our Women and Investing special report.
Not only is the gender pay gap real, it’s pernicious.
Estimates of how wide the gap is varies according to different research methods, but most sources agree that it's still significant. The Pew Research Center found that women made 85% of what men did in 2018. The Census Bureau, meanwhile, found in 2017 that women earned 80% of what their male counterparts earned.
Equileap, which researches corporate gender equality and diversity issues on a worldwide scale, found that the story was similar at the global level: At present, female workers worldwide get paid only 77% of what men do. At this rate of change, there will be no equal pay until 2069, Equileap estimates in its Gender Equality Global Report.
There many reasons the pay gap exists. Sometimes it's because women don't make as much money as similarly qualified men do for doing the same jobs. But many other times it's the result of discriminatory practices that prevent women from being hired in the first place, or from being promoted to more senior roles. Unfair pay practices have far-reaching implications for women's financial security at all life stages and shifts the global wealth balance quite unfairly away from women. Chronic and persistent underpayment prevents women, who are statistically more likely to be caregivers to family, friends, and neighbors (and also to outlive men), from being able to save and invest enough during their lifetimes to secure their own financial and long-term care needs in retirement.
Evaluating Companies' Commitment to Gender Equality Some companies actively foster diversity and equality by promoting gender balance in their workforce, their leadership, and their supply chain. They institute inclusive policies and create a culture of transparency and accountability.
Many others don’t. Equileap found that 98% of U.S. companies do not publish any kind of gender-segregated pay information, neither overall nor by pay bands. And--this might surprise you--only 52% of U.S.-based companies have an anti-sexual-harassment policy, Equileap found. (That means nearly half of all U.S. companies have no official policy condemning sexual harassment.)
“You can’t change what you can’t measure,” says Equileap’s CEO Diana Van Maasdijk.
To promote positive change, Equileap evaluates companies' gender and diversity policies and practices across 19 criteria, including the gender balance at all company levels and policies concerning pay equality, parental leave, and sexual harassment.
Examining the gender balance at four different levels of a company’s workforce gives better insight into whether a company has a good record of promoting women to senior management and executive levels. (Looking at a company’s overall gender breakdown might reveal that a company has diverse hiring practices but poor career development prospects for women.)
- source: Equileap
Another element Equileap looks at is a company's parental leave policy. With no state-sponsored leave, some U.S. companies have embraced parental leave policies as a way to attract and retain talent. Others, not so much. The International Labour Organization finds that while fatherhood is rewarded by companies by paying higher wages to men with children, motherhood is often a source of discrimination. Companies that offer generous paid leave and flexible work arrangements are more likely to attract and retain valuable female talent.
Finding Undervalued Companies That Value Women We used the Equileap Gender Scorecard to construct the Morningstar Women's Empowerment Index. To be included in the Women's Empowerment Index, we evaluate companies in the Morningstar U.S. Large-Mid Index (which targets 90% of U.S. equity market capitalization) based on their score on the Equileap Gender Scorecard (subject to certain exclusions and sector constraints). The index includes approximately 200 U.S. companies that score highly according to Equileap's methodology, which indicates they have embraced strong gender diversity practices and demonstrate a commitment to equal opportunity.
To find some investment opportunities, we screened the index for 10 high-quality companies that are undervalued based on our analysts’ estimate of their per-share fair value estimate. These companies have a Morningstar Economic Moat Rating of wide (which means we think they have advantages that will fend off competitors for at least 20 years).
 Companies are ineligible for the index if they are involved in weapons, gambling, or tobacco or if they have been named by Norway's Council on Ethics for the Government Pension Fund for human rights violations, environmental damage, or corruption. Companies are also ineligible if they have been involved in any of the following:
- A legal judgment or official ruling regarding gender discrimination or sexual harassment;
- Two or more legal cases brought against the company regarding gender discrimination or sexual harassment, even if settled;
- Two or more legal judgments or official rulings regarding gender discriminatory practices in marketing and advertising.
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