Gender Inequalities and Corporate Social Responsibility: A Role for Reflexive Regulation?

1. Gender Inequalities and Corporate Social Responsibility: A Role for Reflexive Regulation? Colm McLaughlin – University College Dublin Simon Deakin – Centre for Business Research, University of Cambridge ESRC – Gender Network (GeNet) Project

2. Introduction • We examine equal pay and gender issues in the context of wider debates about the effectiveness of different regulatory regimes: • Hard versus soft law • More specifically the question of mandatory pay audits • We apply a ‘reflexive regulation’ framework to examine the issue of pay audits • Part of a wider project looking at the various pressures on organisations to address gender inequality (e.g. business case, capital market pressures, unions, public procurement, law, etc.) • Draws on 40 interviews with: organisations (20), fund managers, unions, and other stakeholders. • Eight private sector organisations, eight public sector organisations, two Universities, two not-for-profit. • Access issues: Private sector firms all ‘diversity-friendly’

3. Equal Pay and Mandatory Pay Audits • 30 years after the Equal Pay Act significant pay gap remains (16.4%; 20.8% for private sector) • Mandatory equal pay audits??? • Equal Pay Taskforce (2001) – mandatory pay audits • Kingsmill (2001) – voluntary approach • mechanisms of corporate governance, human capital management, institutional investors, reputational risk • Women in Work Commission (2005) – no agreement • Discrimination law review (DLR, 2007) – contravenes ‘better regulation principles’; business case arguments • Range of public policy supports for voluntarist approach • But, proportion of large private sector firms voluntarily conducting equal pay audits still under half (see EOC and EHRC surveys) • Most firms “do not believe they have a gender pay gap” (EPTF) • → Equality Act (2010) (requirement for large organisations to report their gender pay gap from 2013????)

4. Limitations of a ‘hard’ law approach Dominant discourse: Encourages compliance rather than real engagement ‘Red tape’ - endless bureaucracy - one size fits all → DLR:“contravenes better regulation principles” Law translates incompletely into the economic and organisational spheres – Autopoiesis – systems theory (Teubner, 1992) Systems are autonomous and closed Legal system has unique linguistic forms and institutional processes On-going ‘juridification’ of law = complexity E.g. equal pay legislation in the UK

5. Reflexive Regulation • A shift from substantive to procedural regulation • Involving deliberation by stakeholders • Standards set by law can be modified, within limits • Stimulates enforced ‘self-regulation’ • Includes default rules acting as a stimuli for self-regulation • A flexible process, but one involving external benchmarking – shared learning – ‘best practice’ • Proactive rather than reactive solutions • Law still has a number of roles to play • Bridging institutions necessary component – ‘structural coupling’ of the legal and organisational systems • E.g. collective bargaining or employee representation mechanisms

6. Issues and Limitations of Reflexive Regulation • Conditions under which this approach might be successful? (‘the frame’) • e.g. disclosure rules ineffective without adequate system of PIs • Capacity of the bridging institutions to play their ascribed role • e.g. employee representation mechanisms • May ignore conflicting political and economic interests • Deliberation versus distributive bargaining (e.g. equal pay in local authorities) • Law may be framed by business case discourse (efficiency) rather than employee rights → De-politicisation of the law through deliberation

7. Gender Equity and Corporate Governance • Growth in CSR reporting, codes of conduct, CSR indices.... • Socially responsible investment (SRI) • United Nations Principles for Responsible Investment (UNPRI) – US$14 trillion • UK SRI – €331 billion (tenfold rise 97-01) • US SRI – 13% of all equities • Supported by reporting requirements: • SRI Pension Disclosure Regulations: extent to which social ethical and environmental (SEE) issues affect investments • Myners Principles: pensions to report investment principles on an annual basis • ‘Enhanced Business Review’: aimed at firms, disclosure of SEE information • Increase in shareholder activism, • e.g. Unions training pension fund trustees • But impact of these developments on employment issues generally, and gender specifically?

8. Limitations of Corporate Governance • Extent of institutional activism marginal: • Pension fund trustees conservative and concerned with fiduciary duty: • “I was at a meeting the other day and an actuary said that the downfall of the pension fund was when you let women in. This was publicly, in a meeting called by the xxxx pension fund… that’s what an actuary said…… There are some severe barriers to overcome”. (Union official) • NGO and trade unions – disconnect between trustees and the aims of the organisations • Union official on equal pay: £70 million → £70 billion is material interest • Hierarchy of CSR issues: diversity issues very low down the list • Women on boards raised, but few other gender issues • Pay audits = micro managing • Lack of transparency and meaningful quantitative information on both institutional side or PLC side • Pensions: Statements of Investment Principles “sit in a drawer”, minimal reporting about how policy is implemented • Limited reporting of employee PIs by PLCs • On gender issues, PLC policies may be reported but rarely the impacts (Grosser & Moon, 2008) – lack of quantifiable information for any meaningful assessment or comparison

9. Pay audits as ‘reflexive regulation’ • Mandatory Pay audits = reflexive regulation • Commit actors to a process (analyse pay) not a specific outcome, requires transparency about process and results → might open up deliberation about the pay gap and potential solutions • Pay audits in our sample of organisations • All had conducted pay audits but only one private sector firm had shared the results with staff • “We would only do it voluntarily if it would show us in a good light… Without the law we would never do it” (HR Manager, PLC) • Fear of reputational risk (e.g. not-for-profit) and litigation • De facto mandatory in the public sector

10. Mandatory vs Voluntary Pay Audits • Mandatory pay audits more effective because of transparency & deliberation • Deliberation leads to deeper analysis, e.g. Issue of appointments • Voluntary process ≠ reflexive • No transparency, no deliberation • “Publicly I don’t like transparency, privately I think it can only help” (Diversity Manager, large PLC). • Private sector firms: ‘equal pay not an issue for staff’ • Canadian experience: Effective where unions had a presence – otherwise manipulated by management (Canadian Pay Equity Taskforce, 2004) • Benefits of deliberative pay audits can go well beyond pay discrimination • E.g. Part-time staff at one University

11. Role of law in organisations • Private sector companies did not see law in any way as a driver • Bridled at the suggestion • “We would very rarely refer to the law as the reason for doing something… our aspiration is best in class approach… We would want to do better than that” • Q Does the law play any role in driving you? A. No, none at all. • → Influence of strong ‘business case’ discourse • Upon probing: law as a powerful tool for ‘gender champions’ to change attitudes/behaviours within their organisations (so as a way of opening up dialogue and deliberation within the management team): • “yes, if there was new legislation that came in we would use that to review our existing policies and also as a platform for a change of behaviour as well. So yes, from that point of view it would be a driver”. • These firms are leaders in the field → influence on government policy • Strong resistance (hostility) to legal solutions • Only one private sector firm had shared the pay audit results with staff • Tension between law and business case – want to be ahead of the law when they agree with the law – but slow to respond to impending transparency requirements

12. De-radicalisation of Gender Equality • Organisational resistance to ‘business case’ constraints, e.g. internal targets • “what are women going to contribute that is going to make us more successful?” • Changing culture a slow process → In the interim provide supports, networks, etc. so women can “survive in a political environment [and] play the game” → change women rather than the organisation?? • Business values prioritised over rights, e.g. Work-life balance • About changing the work so people can find balance or about helping employees fit the demands of the job around their lives? • “if the pace is relentless, what can we do to help you fit that around your life” • women returning from maternity leave who don’t want to travel and work long hours “give working women a bad press” • Most ‘pressing issue’: lack of women in senior roles • Not occupational segregation or low-paid women or...... • The “exclusive reliance on management action risks promoting conceptions of equality that are partial and insecure” (Collings & Dickens 1998).

13. Conclusion • Strategy of ‘encouraging’ organisations to voluntarily undertake pay audits on their terms ineffective • Institutional mechanisms of corporate governance and CSR envisaged by Kingsmill have had minimal impact on gender inequality. • A ‘reflexive regulation’ approach has the potential to overcome some of the barriers to both hard and soft regulatory strategies • Mandatory pay audits could fit within a reflexive approach → potential for deliberation and shared learning • Much to be uncovered about the ‘frame’ • Transparent, detailed and standardised information • What sorts of deliberative mechanisms are needed? • Shadow of current legislation over reflexive law • Wider questions about the de-politicisation of equalities