Why Corporates Must Address the Gender and Racial Pay Gap as Part of Diversity Efforts


How Corporate America is Turning Rainbow to Become More Diverse

Diversity is the buzzword among corporates and business leaders in recent times. Not a day passes without some prominent business leader or CEO (Chief Executive Officer) of a major corporation declaring their intent to have a more diverse organization and to be more inclusive towards racial and sexual minorities and women.

Indeed, with several studies pointing to how diverse firms are known to perform better than their less diverse counterparts, many proponents of gender and racial diversity are making the business case for diversity.

This line of thinking stems from recent research which shows that corporations that hire more women and people of color as well as sexual minorities from the LGBTQ (Lesbian, Gay, Bi, Trans, and Queer) communities outperform others in terms of better financial and workplace performance.

These studies that show a causal link between diversity and more fulfilling workplace culture as well as diversity and increased plurality of views in decision making have thrown light on the dark places of less diverse corporations which are shown to suffer from monochromatic approaches to corporate decision making and organizational performance being lesser than diverse firms.

The term used for such diverse firms is the so-called Rainbow Organizations so named because of the logos and the multihued pictures that often depict gender and racial diversity.

Diversity Should Not Make Organizations Show Businesses without Substance

Having said that, despite these findings from reputed researchers, many corporations continue to pay lip service to diversity and even when they hire more women and people of color as well as sexual minorities, it is more towards satisfying the formal and informal targets set by the top management for actualizing a diverse workplace.

Indeed, in many American as well as Indian firms, the trend nowadays seems to be towards hiring more sexual minorities and women in addition to racially disadvantaged groups more to “Showcase” such employees as their contribution to diversity rather than any meaningful or concrete and tangible moves to both benefit such communities and gain from their presence.

In a way, many leading corporations have also fallen into this trap of making diversity a “Show business” where their Rainbow Recruitment policies are just an extension of their Public Relations efforts to portray themselves as being progressive and where the ground realities do not change much.

Thus, it is the contention in this article that corporations ought to do more to qualify to being truly diverse firms.

Addressing the Gender and Racial Pay Gaps as Part of Becoming Truly Diverse

A key area where they can indeed make a difference is in addressing the Gender and Racial Pay Gap which many leading researchers believe is the root cause of all problems related to diversity.

The contention here is that when women are paid lower than men and when racial and sexual minorities are hired for junior level positions and a Glass Ceiling prevents them from progressing further, diversity takes a backseat.

Indeed, publications such as the AFR or Australian Financial Review have run special features on how Gender Pay Gap is pervasive across the world in all leading economies as well as emerging ones.

While in advanced countries of the West, Gender Pay Gap does not manifest until the Middle Management Level, cultural stereotypes and prejudices work against women and other minorities even at the Entry and Junior Levels of the Organizational Hierarchy.

Moreover, the sustenance and perpetuation of Patriarchic attitudes mean that Women and Racial and Sexual Minorities hardly have a chance for networking and joining what are informal groups that help employees bond with each other and where key partnerships and friendships are formed that lead to productive outcomes.

Boys Clubs and Barriers to Women and Racial Diversity

For instance, how many times have you seen women networking with their male peers in the so-called Coffee and Smoking Breaks as well as after hours in Pubs and other Boys Clubs where key decisions related to promotion and pay raises are often discussed informally?

Indeed, this is a very important point made by many leading women business leaders who have faced formal and informal barriers and who point to the trend of paying women lesser than men being the outcome of entrenched discrimination having roots in culture, customs, traditions, and last but not the least, the subtle and the direct messages sent by the top leadership.

While the other determinants of discrimination are more visible and talked about, the hush-hush mentions of how subtle forms of pay and promotion discriminations are at the heart of organizations being less inclusive are rarely mentioned in the open.

When Sports Can Actualize Gender Pay Parity, Why Not Knowledge Work?

Thus, any organization that prides itself on being a diverse one has to necessarily have a Conversation with itself as to how the Gender and Racial Pay Gap is indeed the true heart of being truly diverse.

In the same manner in which Tennis Professionals seem to be inching towards Gender parity in Pay, it is time for Corporate America and India Inc., to make efforts towards this end.

Lastly, unlike sports which demands physical strength and stamina that can be used as an excuse to deny Gender Pay Parity, there is absolutely no reason why the services firms of the 21st Century should pay women less especially when the work is more mental than physical and more so, when research has shown that women outperform men in many of the cognitive and knowledge based tasks that are the Bread and Butter of Information Technology, Financial Services, and Business Process firms.

To conclude, it is high time business leaders admitted this less mentioned, yet vital aspect of what makes their firms truly diverse and take concrete steps to tackle it.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.