A recent study by Equilar—an executive compensation firm—reported that female CEOs were better compensated than male CEOs. Of 341 responses from S&P 500 companies, the 17 female CEOS made almost $8M more than the 324 males CEOs.

Although the number of female CEOs is small, it’s encouraging that they are generously recognized for their contributions to the companies they lead. But it’s way too early to declare victory of any sort.

These findings have been widely covered in the media, in part because they fly in the face of decades of studies demonstrating a pay gap where women make around 79 cents for every dollar men make. Even when focusing purely on the executive domain, most studies show that women executives (CEOs of smaller firms, CFOs, COOs, Presidents, Senior Vice Presidents) are paid less than their male counterparts. Just last week the Wall Street Journal came out with a study affirming this pay gap, and showing that the most educated women fare the worst.

The question is why these women at the very top (but nowhere else) are being paid more? It may be that the 17 companies with female CEOs have more progressive policies that recognize the importance of promoting and rewarding women for the work they do. And, it’s entirely possible that these women are simply better at their jobs than their male peers.

Another explanation comes from a soon to be published study that argues that higher female CEO pay is a function of a simple supply and demand effect. The supply of qualified women executives doesn’t match the demand, leading to an increase in compensation. This is known as the diversity premium.

A more cynical but still plausible explanation comes from research on the pendulum of moral and ethical behavior. Such behavior isn’t static; rather it swings from one side to the other and back again, depending on past and anticipated circumstance. For instance, after Hurricane Katrina, companies with poor social reputations were more likely to make disaster relief donations than were companies with positive social reputations. Thus, it’s reasonable to wonder if boards pay top female executives a premium, at least in part, as a means to right past wrongs. This is known as moral cleansing. Perhaps the firms paying higher compensation to female CEOS have particularly bad social reputations.

Alternatively, these female CEOs may qualify for generous compensation packages as a strategic maneuver by the board to allow future morally dubious behavior to occur without discrediting the firm’s reputation. Such behavior has also been documented, and is known as strategic moral licensing. If one suspects that dubious behavior will be necessary in the future, they can offset it by being honorable now.

Although all this might seem speculative, it’s not so much so. Scientific research finds that the presence of women on top leadership teams is associated with fewer women subsequently being hired to high level positions. The conclusion is that this occurs because the presence of C-suite woman signals progressiveness, thus exempting the firm from enacting and enforcing robust women friendly policies. This finding suggests that higher female CEO pay may also serve to promote an artificial enlightenment that allows companies to take the foot off the gas in terms of equalizing female pay elsewhere in the organization.

We don’t mean to rain on the parade of these hopeful findings. Bridging the pay gap between men and women is critical. Optimistically, firms rewarding outstanding performance by female CEOs will be a beacon that will propel other companies to equalize pay between men and women, not just at the top but across levels of organizations. But we can’t take things at face value, as all things have intended and unintended consequences. The findings reported here should be widely known, and both organizations and those women ascending the ladder should be particularly vigilant about what their achievements might mean for those around them.

For the Harvard Business Review version, click here.




Dezső, C.L., Ross, D.J., & Uribe, J. (2016). Is there an implicit quota on women in top management? A large‐sample statistical analysis. Strategic Management Journal 37 (1), 98-115.

Jordan, J., Mullen, E., & Murnighan, J. K. (2011). Striving for the moral self: The effects of recalling past moral actions on future moral behavior. Personality and Social Psychology Bulletin, 0146167211400208.

Merritt, A. C., Effron, D. A., Fein, S., Savitsky, K. K., Tuller, D. M., & Monin, B. (2012). The strategic pursuit of moral credentials. Journal of Experimental Social Psychology, 48(3), 774-777.

Leslie, L.M., Manchester, C., & Dahm, P. (in press). Why and when does the gender gap reverse? Diversity goals and the pay premium for high potential women. Academy of Management Journal.

James Bailey, Margaret Ormiston