Usually, a story about how much a CEO is paid involves criticism that the pay is too high. But there's a flap unfolding this week about how it seems the new CEO of General Motors, Mary Barra, makes less – a lot less – than her predecessor, Dan Akerson.
Barra’s salary is $1.6 million, and Akerson’s was $1.7 million, but the difference is in the extras. Barra’s total pay is about $4.5 million, and Akerson’s added up to $9 million, thanks to what are called short-term incentives – bonuses tied to performance.
"There’s a bit of mystery and guesses that go into this thing," David Larcker explains. He is the James Irvin Miller Professor of Accounting at Stanford University’s Graduate School of Business.
"You garner benchmarks, and then you have professionals on the board that have done this many times, and they try to make an informed judgment," he says.
And that is what GM says it did. The company also says Barra’s compensation package is incomplete. Later this year, it’ll include "long-term incentives."
"You can kind of explain away maybe one individual difference, but across the pattern of data, those averages don’t lie," says Linda Babcock, an economics professor at Carnegie Mellon University.
And that may be why so many people are talking about this. On average, Babcock says, a woman makes about 80 percent of what a man would, but, she points out, that pay gap widens the higher you go up the corporate ladder.
"The public scrutiny over this issue is really a good thing," Babcock says.
According to Virginia Valian, who teaches psychology at Hunter College, women have to walk a line men don’t.
"People don’t mind entitlement in men to the same extent that they mind it in women."
We make judgments in the workplace about men and women, she says, and these judgments – even if they are subtle, can result in big differences in what people get paid.
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