Target, Starbucks earn top scores on pay equity performance while others lag

Among more than 100 of the largest companies in the U.S., Target and Starbucks received perfect A+ scores for comprehensive disclosures of median and adjusted pay gaps and annual commitments to conduct and publish pay equity analyses, according to the seventh annual Racial and Gender Pay Scorecard by Arjuna Capital, Proxy Impact and DiversIQ.

While 28% of companies received “A” or “B” scores for their efforts, 44% of companies earned an “F” for failure to disclose racial and gender pay gaps, including Alphabet, Berkshire Hathaway, Boeing, Coca-Cola, Costco, CVS and Netflix.

“Companies are embracing a more transparent, comprehensive approach to pay gap reporting — a shift that goes beyond lip service to create real and lasting change,” Natasha Lamb, lead author and chief investment officer at Arjuna Capital, said in a statement. “Through their equal pay ambitions, smart companies are capitalizing on key performance benefits — gaining a competitive advantage in recruiting and retaining top talent and improving leadership diversity.”

In a review of 128 companies, the 2024 report found a 12-fold increase in the number of companies reporting quantitative pay gap data since 2016. About 53% of companies on the Scorecard — chosen among the 100 largest U.S. companies and companies engaged by investors on the topic — disclose data, as compared to only 25% of the S&P 500.

The financials/real estate investment trust sector leads in disclosure, at 68%, followed by the consumer sector at 56%. On the other hand, only 25% of companies in industrial/materials sectors and 20% in energy/utilities sectors are disclosing data. 

As a first step, companies should analyze their current pay structures and disclose any racial and gender pay gaps, according to the report. Full disclosures can include adjusted and unadjusted pay gaps, pay components, methodology used in pay gap analysis, and policies and actions to address gaps.

Employers may keep in mind that labor supply imbalances — not just participation rates — may fuel wage gaps in some industries, according to a report from S&P Global Ratings. Addressing these imbalances by tackling biases or structural impediments could help reduce wage gaps.

For instance, women in science, technology, engineering and mathematics (STEM) fields say representation has increased but gender wage gaps and promotion biases persist, according to a report by MyBioSource. Mentorship and transparency can help.

In addition, while pay transparency may narrow pay gaps, it may not close them entirely, according to a study by University of Delaware researchers. Other factors, such as aggressiveness, competitiveness and social comparison, can affect how job candidates approach pay discussions during the hiring process.