Women Executives Face Gender Discrimination In The Issuance Of Stock Options

The recent Women's March was one of the largest protests in U.S. history, highlighting the notion that gender diversity in America has reached an all time high. This has also been reflected in numerous reports illustrating ways in which women are still underrepresented at almost every level in the corporate pipeline.

For example, the Women in The Workplace 2016 report from LeanIn.Org and McKinsey & Company highlights a number of alarming statistics regarding the impact of gender discrimination and pay parity on women employees and executives. Yet out of all the discrimination women may face in the workplace, the discussions tend to focus on wages -- and the spotlight is on the pay parity between women and men. But is that the only component of gender parity?

Shining a Light on Stock Options

Recent research has noted that stock-based pay is often one of the biggest, yet least-public component of an executive's compensation package. And now new studies are reporting that female senior leaders may receive fewer stock options and grants compared to men.

This is of particular interest to Jonathan Melmed, an employee-rights class action lawyer based in Los Angeles whose law practice is focused on representing large groups of employees in these types of employment matters.

"Stock option agreements are contracts that allow employees to either be granted shares in a company or the right to purchase shares at a certain price for a certain period of time. They often form a large component of compensation, particularly in situations where companies are going public or have publicly traded shares," Mr. Melmed explains. "The awarding of stock options is a somewhat secretive process handled by 'compensation committees' which are small boards of five to ten individuals who are typically, but not always, white and male. They are somewhat incestuous with executives from one company sitting on the compensation committees of other companies."

Mr. Melmed has conducted an extensive amount of research regarding gender discrimination in stock option awards and has been exploring the potential class-wide implications. Over time, he has noticed that women earned less -- across the board -- in all forms of compensation, including salary, bonus, restricted stock, stock options, stock grants and other payments.

To make matters worse, gender parity in the issuance of stock options remains a confidential issue that isn't widely discussed when it comes to why women get paid less than their male colleagues.

"Gender discrimination in the issuance of stock options seems to be bubbling under the surface. There is a spotlight now on wage parity, but no one seems be asking other highly relevant questions. Compensation committees typically have discretion to award stock options and many suspect that -- consciously or not -- female employees are awarded less options and on less favorable terms than their male counterparts. This can result in millions of dollars in pay differentials between male and female executives and engineers in the technology industry when you extrapolate the data on a potential class-wide basis," Mr. Melmed explains.

Raising Awareness

While stock option issues for women in the workplace remains a somewhat discrete topic, awareness is finally raising. For example, a recent article revealed that Snap Inc. (the parent company of Snapchat) paid Joanna Coles, their only female director on its board, the least amount of total compensation. Strikingly, the article explains that Snap awarded Coles much less stock than her male peers, which means she stands to make relatively little money off the upcoming IPO.

Yet the biggest differentiating factor in Coles' pay was the number of shares she received in Snap, demonstrating why Cole is still getting paid much less than her male colleagues.

Snap's highest-paid director is former P&G Chairman A.G. Lafley, who joined the board in July of 2016, and still made more than $2.6 million for the year. Lafley's compensation includes a retainer of $200,000 annually, which is nearly six times as much as the one Coles receives. Furthermore, Lafley received almost all of his compensation in stock, noted to be 162,762 shares worth more than $2.5 million.

On the other hand, Coles, who is awarded stock on an annual basis, only received 7,488 shares for 2016. Other male board members each received 65,106 shares to vest over the next four years, the equivalent of twice as many shares per year as Coles received. Unfortunately, the fact that Coles is receiving less compensation than her male colleagues remains consistent with today's current trends for women's compensation in the workplace.

What's in Store for the Future?

Seventy-eight percent of companies report that commitment to gender diversity is a top priority for their CEO, up from 56 percent in 2012. However, this issue can only be combated once more compelling cases for gender diversity are raised. The hiring and promotion process must also be evaluated fairly. Finally, women employees and executives must understand their compensation rights (stock-option awards) and ask for what they deserve.

"The good old boys club still operates in some of these compensation committees," says Craig Ackermann, an employment lawyer from Los Angeles who has handled a number of lawsuits for workers involving stock options and discrimination cases. "Since the awards of stock options are not always publicly reported, it is difficult for female employees to know if they are getting less than their male counterparts."

Fortunately, both Mr. Melmed and Mr. Ackermann seem optimistic that gender pay parity is dwindling.

Ackermann explains that "other industries, such as banking have seen major settlements with some Wall Street banks having paid out hundreds of millions to female bankers for underpayment. So far at least, tech companies have avoided high profile gender discrimination class actions. But with the recent passage in California of legislation strengthening the fair pay laws, it is likely that Silicon Valley will catch up soon enough and serve as a primary example for fair compensation for women everywhere."

Optimism aside though, it is still up to us women to fight for what we deserve. In this case, we deserve equal pay, which means an end to gender discrimination in the issuance of stock options, and hopefully, a more transparent system able to eradicate these parities in the future.