Paul Hodgson: The Pfizer shareholder resolution story on gender/race pay gap evaluation, and its broader relevance

Investors argue that the company’s data wasn’t what they had been promised

At the end of last week, RI looked at the complexity of this year’s US shareholder resolution season.

The story is encapsulated in a single median gender pay gap resolution filed at Pfizer, the US pharmaceutical firm. 

The resolution was withdrawn last year as a result of the company’s promise to conduct an ‘adjusted and unadjusted’ pay gap analysis.

But, it was refiled this year because the company failed to make the results public. 

At Pfizer’s annual general meeting on 23 April, the re-filed resolution by Proxy Impact on behalf of client shareholders calling for the publication of an unadjusted median gender pay gap figure, received the support of 38% of the votes cast.

This year’s proposal said: “In 2019, shareholders withdrew a Report on Gender Pay Gap resolution when Pfizer agreed: ‘to determine whether and to what extent Pfizer has a global gender pay gap and a US race pay gap, on both an unadjusted and an adjusted basis.’ Yet, Pfizer’s gender pay gap statement of October 17, 2019 fails to provide any unadjusted (median pay) data.”

The ‘withdrawal letter’ from Pfizer, provided to RI by Michael Passoff, CEO of US shareholder engagement and proxy voting service, Proxy Impact, announced a third-party study of its gender and race pay gaps on both an adjusted and unadjusted basis. Passoff explained: “Over the last six years, at least 68 companies have faced 125 shareholder resolutions on the gender pay gap, along with many more shareholder dialogues in the absence of a formal proposal.

“Many of these companies responded with some kind of pay gap report,” he continued, “but they all used adjusted pay equity data. The adjustments were generally significant; for example, Google’s report initially left off 11% of its staff (every VP and above) which is where the largest gaps are found. Not surprisingly, adjusted data enabled them all to report ‘99%’ equal pay, though we questioned how accurate the 99% claims really were.

“Consequently, we started asking for unadjusted data.” Passoff said that the unadjusted pay gap comprises equal pay and equal opportunity and the companies that Proxy Impact had been talking with were ignoring the latter. Adjusted pay gap analysis controls for a whole host of variables such as position, seniority, tenure and allows companies to ignore the fact that women and minorities are significantly under represented in senior positions.

While the Pfizer letter announced the third-party study, it also went on to say: “We will also disclose certain elements of the results to the public in late 2019 or early 2020.”

But when these disclosures came out in October 2019, only the adjusted data was given, which showed that women and minorities earned 99% of white male employees’ pay. The release also promised that the company would increase the proportion of women and minorities in positions of senior vice president and above, but this is not the same as releasing unadjusted data. RI asked Pfizer if it was going to make those disclosures in the future, given the level of shareholder support. The company responded by referring to the October 2019 press release.

As a specific indication of what this figure might look like, in the UK, which mandates such disclosures, the 2019 Pfizer UK Gender Pay Gap Report showed a 15.9% unadjusted median pay gap, which had actually increased from 2018, up from 14.5%.

“It was important to hold the line on this issue,” said Passoff, “while at the same time companies were holding the line because the [unadjusted pay gap] number is the most unflattering. Because almost all other companies were refusing to release this number, I didn’t feel it was right to give Pfizer a pass, even though it did make some disclosures and dialogue was good.”

RI asked Passof how often companies promise something and then renege on the promise? “I feel like it happens a fair amount of the time, or they end up just giving less. Or rather it’s common that they promise one thing and then deliver something else,” said Passoff. “It was the same with Pfizer, they did end up giving me less, and it was the key information that they didn’t fulfil. The comparison here is ExxonMobil which issued a climate report in response to shareholder demands but said that it wasn’t going to do anything different because climate’s not an issue.”