- The number of companies choosing to disclose workforce data through the Workforce Disclosure Initiative in 2020 has increased by 23%, according to fresh data.
- Capital Monitor finds that where companies have the choice to make public or just give investors answers on pay gaps and ratios, they were more likely to opt for the former in 2020 than in 2019.
- However, when confronted with the option to disclose publicly only, companies are more inclined to leave the answers blank.
Contrary to existing opinion, some of the world’s most influential companies have made more of their data on workers’ pay publicly available this year via the Workforce Disclosure Initiative (WDI) than last year, according to Capital Monitor analysis.
A project run by financial charity ShareAction, the WDI is led by a coalition of 68 institutional investors with $10trn in assets under management (AUM) with the aim of enabling investors to gather crucial data on the frequently neglected ‘S’ – social – of ESG. Its intention is to increase transparency around the disclosure of data on key topics affecting employees, such as how fairly different genders and ethnicities are paid, or how grievances are managed within supply chains.
In 2021, 173 companies across the globe took part in the initiative – a 23% increase on 2020 when 141 large companies signed up. The initiative has been running since 2017 and has increased the number of participating companies each year since.
For more than 100 questions focused on different topics surrounding work, companies can either choose to leave answers blank, answer the question publicly, or provide an answer to investor signatories only. For the purpose of this analysis, the latter counts as a private answer.
Capital Monitor found that in the 2021 survey, on average companies made at least 45% of their answers public on issues relating to workers’ pay and wage gaps, compared with 41% in the previous year. Combined with the fact that more companies took part in the initiative in 2021, this is a broadly positive development.
In contrast with Capital Monitor’s analysis, ShareAction claims companies made fewer answers public overall, including on workers’ pay gaps, in 2021 compared with the previous year, citing the lack of public data as a potential pandemic blip. This interpretation of the WDI published in April was quickly picked up by influential media outlets, including Bloomberg, and seen by asset owners. Given transparency is such an important component of good governance to investors, the discrepancy is not an immaterial one.
The data in ShareAction’s 2021 survey is from 2020, and so reflects performance during the peak of Covid. So while in the 2021 survey, the latest data is referred to as being from 2020, and the data from the year prior is referred as the 2019 data in this piece. Specifically focusing on section five of ShareAction’s annual questionnaire, which looks at workers’ pay gaps and ratios, ShareAction says that three-quarters of companies publicly provided data in 2019 compared with just half in 2020.
It seems that while in the 2020 report ShareAction counted blank answers as public, in the 2021 report it counts blank answers as private answers. It is unclear why a blank answer should be treated as either a public or private disclosure.
Using a consistent approach to calculate the public and private data between the two years, and separating answers into public, private and blanks, we reached the 45% figure for the pay gaps and ratios section. This means that Capital Monitor and ShareAction have come to different conclusions for how much public versus private answers companies have chosen to disclose.
In explaining the difference in conclusions, Conor Quinn, a spokesperson for ShareAction explains: “In 2020 we included these ‘public blanks’ in our analysis of the percentage of answers submitted publicly. In 2021 we excluded these blanks. Applying this new methodology to the 2020 data set, 79% of the 2020 answers were submitted publicly, vs 65% in 2021. As noted in our recent findings report, we suspect this may be a temporary decline related to the Covid-19 pandemic.”
Getting a blank response
While the increase in public answers is a positive step forward, Capital Monitor notes that, on a proportional basis, companies left more questions blank in 2020 than in 2019.
In 2019, for example, 74% of companies provided data on the CEO to median employee pay ratio. In 2020, that figure fell to 67%, according to ShareAction. A reason for this could be the request by ShareAction that any disclosure on this subject only be made public (rather than given the option to supply to investors). Either way, the non-governmental organisation observes that the CEO to employee ratio remains high this year, at 106:1.
Companies were much less likely to disclose data on ethnicity pay gaps than gender: less than half as many companies provided the percentage of the company’s total direct operations workforce in leadership positions by race or ethnicity (39%) compared with gender (97%), according to ShareAction’s report.
Capital Monitor finds that 42% of companies on average left their answer blank in 2020, compared with an average of 36% in 2019. This could be due to companies having less data available during the pandemic, or perhaps because they are concealing poor results. Companies are not obliged to disclose their data publicly even after signing up to the WDI.
James Coldwell, programme lead at the WDI, tells Capital Monitor it is up to each individual to decide whether or not it is better for companies to disclose data privately to investors rather than leave the answer blank. However, he adds: “All companies, regardless of what the main business activity is, should be transparent about how they're looking after their workforce.”
Move to mandatory
Generally, fewer companies are choosing to tick the only ‘disclosed to investor signatories’ box this year than last year, both in absolute and relative terms.
That includes when you remove questions that were mandatory in 2020 from the sample; in 2020, two out of nine overarching questions – question 5.1 (on the CEO to median employee pay ratio) and question 5.5 (on the percentage of men and women in different pay grades) – became mandatory public answers, whereas last year companies could choose to make them private.
ShareAction plans to increase the amount of mandatory questions each year until the gap between what ia available to investors and the wider public becomes “negligible”, Coldwell says.