A study examining executive pay at nonprofits found women earn 8.9% less than men and that the gap widens when there is room for salary negotiations.

The study analyzed four years’ worth of IRS form 990 filings. After confirming a pay gap, the researchers explored the extent to which real or perceived negotiation opportunities contribute to this difference.

“We may not expect to observe a gender pay gap among the nonprofit sector, even though recent research has found gaps in pay among for-profit executives,” says Curtis Hall, an associate professor in the Bennett S. LeBow College of Business. “First, there is more female participation in the nonprofit workforce compared to the for-profit sector. Second, one may expect stakeholders, like donors or boards of directors to curtail gender pay gaps. But we didn’t find this to be enough of a factor.”

Role_Matters

Median gender pay gaps vary by position.

To gauge the role of negotiation, the researchers studied competing options for the executives, the organizations’ constraints in paying executives, the gender composition of its leaders and the pay variability within its executive ranks. Each factor affects negotiation prospects, according to the authors.

They found that external employment options and competition lead to greater gender pay gaps, with male executives more likely to capitalize on patterns in the broader labor market or other opportunities to negotiate more compensation.

The pay gap shrinks in nonprofits with a female CEO and/or where women are well represented on boards. The findings, which appeared in the Review of Accounting Studies in 2022, suggest that female leadership may increase female employees’ willingness to negotiate. Hall’s co-authors were Andrew Finley, associate professor at the Robert Day School of Economics and Finance at Claremont McKenna College and former LeBow research assistant Amanda Marino, now at San Diego State University.

“This documents the contexts that influence negotiation on the gender pay gap, which is part of a larger societal issue,” Hall says. “Employers should be cognizant of how the environment for negotiating compensation within their organizations can lead to gender-based pay disparities. Perhaps more importantly, business leaders and educators should think about ways to empower female workers to get more out of salary negotiations, which would hopefully help to close gender pay gaps in the future.”