From Citigroup to Schwab, here are the best and worst companies on disclosing racial and gender pay gaps

More companies are disclosing their racial and gender pay gaps this year. 

The latest scorecard from Proxy Impact and Arjuna Capital found that 13 of 68 large U.S. companies received an “A” for reporting the most internal data on how employee pay varies along racial and gender lines. That’s an increase from last year’s rankings, when only seven companies got the highest grade. 

Michael Passoff, the CEO of Proxy Impact, a shareholder engagement and proxy voting services company in Berkeley, California, said the improvement is due to more companies providing transparency about their median pay gaps data, a metric that shows whether minorities and women hold as many high-paying jobs as men. That’s the yardstick used by the Organization for Economic Cooperation and Development.  

The financial sector has the highest pay gap of all the industries covered in the report, which cited data from PayScale. The software compensation company found an “unadjusted” gender pay gap in the industry of 33%. That measure compares salaries across all roles, not within specific job function. When those latter factors are considered, the pay gap is 2%.

A separate PayScale study cited in the scorecard report found that 58% of finance and insurance companies plan to conduct a race or gender pay equity analysis by the end of this year.

The scorecard comes as some investors increasingly seek to put their dollars into stocks and funds that align with their values and morals — and amid a burgeoning backlash by conservative states to environmental, social and governance investments, a space that includes pay-equality issues.

The 6th annual scorecard ranked companies that have been asked by shareholders to improve their pay equity disclosures in various areas. Categories include how jobs are distributed by race and gender; which groups hold high-paying jobs; pay disparities between minorities and non-minorities, and men and women performing similar roles. The rankings also measure the degree to which a company reveals data on its global operations and discloses bonus and equity incentives.

“Racial and gender pay gaps are structural and persistent, but the scorecard holds up those companies that are doing the real and honest work to create pay equity,” Natasha Lamb, a managing partner of investment management firm Arjuna Capital in Durham, North Carolina, said in a statement.

Black workers’ median earnings comprised only 81% of white wages in the fourth quarter of 2022, according to the Labor Department. The agency also reported that women working full time earned just 83% of what their male peers took home last year, a $10,452 per year gap. 

Passoff said the scorecard can be a useful tool for investors looking to match their values with their investments, and can have real financial implications for companies. “People make investments for financial performance, but also for their values,” he said. “That can also impact companies’ recruitment, retention of women and minorities.”

Michael Reynolds, the owner of Elevation Financial, a financial planning firmWestfield, Indiana, that’s focused on ESG and socially responsible investing, said that a pay-equity list can be helpful. “I primarily use mutual funds and ETFs, but when evaluating individual stocks, scorecards and ESG, ratings are part of the screening process I go through in addition to the financial analysis,” he said.   

Pressure on companies to come clean about ESG-related matters is increasing. In 2023, shareholders filed 16 resolutions on gender and racial median pay reports — compared to only nine in the previous year — according to Proxy Impact. But Passoff said that the largest asset managers are generally not supporting racial and gender pay reports in shareholders resolutions.

“There could be more action on more equal pay, but BlackRock, Vanguard and Fidelity are not sending a signal to these companies, so they can get away with not providing this information,” Passoff said. “All those companies are going to say they support equal pay, but they don’t vote that way.”

Of the 68 companies examined in the scorecard, 25 received an “F” for failing to disclose data on gender and pay equity, despite telling investors they would do so. Those companies included Google-parent Alphabet, Goldman Sachs and Walmart. 

To see the firms with the highest and lowest ratings on the Proxy Impact and Arjuna Capital scorecard, scroll down the slideshow.

All pay gap scores are on a scale of 0-1, with 1 being the highest score. Racial and gender pay gap scores of 0.5 for BlackRock and others indicate a commitment to publish data in the next year. A company’s total score is an average of all data points and is expressed in percentage terms. Racial pay gap adjusted and gender pay gap adjusted scores account for factors including job role, education and experience.

Financial Planning reached out to all 12 companies listed as the worst for comment. Only one responded, per below.