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What’s United Got To Do With UK Pay Gap Legislation?

This week, United Airlines clearly demonstrated the bottom line cost to a business of negative consumer power and how quickly social media can damage corporate reputation. Whilst there was no immediate impact on United’s market valuation, in fact its shares rose immediately after the event, United have still to learn the longer term financial impact, the cost of rebuilding their brand and customer trust and of repairing their corporate reputation.

Whilst the share price rise may seem counter-intuitive, analysis by Steel City Re, a US based company which analyses reputational strength and resilience of public companies, shows that markets can often be slow in responding to corporate reputational damage. Speaking in Benzinga, an online publication, Steel City Re estimate that it can take the markets twenty weeks to recognise the severity of reputation events but then the company’s share price can be expected to fall by 25%. This is due to a progressive response to the incident by many customers and stakeholders who move from a position of tolerance to one of disappointment and dissatisfaction with the brand or organisation.

In April 2017, mandatory gender pay gap reporting became law in the UK for approximately 8,000 companies employing more than 250 people. Whilst the connection to the United experience may not seem immediately obvious, given that the UK gender pay gap is on average 18%, rising to over 40% in some sectors the requirement to publish company specific gender pay gap data will be giving cause for concern in many boardrooms and executive suites across the country particularly for some big brand and household names. A study by pay and reward consultants Mercer, suggested that 61% of organisations were worried about the impact of pay gap reporting on their reputation not just in terms of its potential impact on staff and shareholders, but also on how this data will be interpreted by the media, politicians and its customers.

Leading gender analysts Catalyst.Org, estimates that, on average, 67% of all UK Household consumption is controlled or influenced by women. And it much greater in many key household areas. As I highlighted in my last blog on female consumer purchasing power, women make the decision or influence the purchase of 92% of holidays, 65% of cars, 93% of food, 91% of homes and 61% of personal computers. And with the extensive and growing use of social networks such as Facebook and sharing of social reviews by women, social media is now playing an increasingly important role in the decision-making process of many women and in influencing their purchasing decisions.

Some companies have decided to make their gender pay gap information public well in advance of next year. Deloitte, PWC and EY have led the way in publishing their pay gap information and Virgin Money, a bank and financial services group owned by the Virgin Group and employing over 3,000 people published its gender pay gap earlier this year. Virgin Money’s mean gender pay gap was 36%, compared to a financial services sector average of 39.5%, both well above the UK average.

The company who actively promote “recognising everyone as equal” admits that the pay gap is largest at senior management levels, which have a 21% female to 79% male ratio. The rest of the organisation has a 44:56 male to female split. Headed up by a female CEO, Virgin Money publicly recognises that it has work to do to address this gap and is aiming for a 50/50 gender balance by 2020 which they believe will help resolve their current pay gap.

So far, the Twittersphere has been relatively silent on these organisations and public and consumer reaction to the earnings differentials appears relatively muted. However, as we head into 2018 and many major consumer and household names publish their gender pay gap information, it may prove difficult to predict customer reaction and for many brands, like United, it may be enough to prove the tipping point between consumer tolerance and disappointment.

Dr Lesley Sawers

GenAnalytics Ltd

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