UNO-Led Research Confirms Significant Gender Pay Gap Exists in Executive Severance Agreements

Men in executive leadership positions receive more than $500k in severance compensation than women receive, according to researchers at the University of Nebraska at Omaha (UNO) and the University of New Hampshire (UNH).

The study, led by Kelsey Medeiros, Ph.D., assistant professor of management within UNO’s College of Business Administration, specifically examines severance packages at the executive level. According to researchers, a gender pay gap of over $500k exists in average severance compensation between male and female executives in large, publicly traded American companies.

Executive severance agreements, which often include benefits received upon termination “without cause,” can be prone to bias due to ambiguity in how they are determined. Such ambiguity opens the door for preconceived notions and biases tying gender to performance, personality traits, and expectations.

Researchers noted that female executives are more likely to be under-valued while male executives are more likely to be over-rewarded. These findings hold true regardless of company performance.

“Discrepancies in compensation based on gender, even upon termination or separation, impact more than an executive’s bottom line. Lower severance pay and a higher likelihood of being dismissed can discourage women from seeking executive roles,” Medeiros said. “That sort of impact can tarnish the culture of an entire organization and make it difficult to attract and retain top talent.”

The research also highlighted that women are at a disadvantage in negotiating better agreements. Women are often met with stronger resistance to negotiations than their male counterparts due to pre-existing notions of gender expectations and behavior.

“We found that male executives are more likely than their female counterparts to be rewarded in their severance agreements when the company’s stock value increased under their leadership,” said Jennifer Griffith, Ph.D., associate professor of organizational behavior and management. “But for women, how well the company was doing had less impact on the value of their severance package. This shows that performance is attributed to other organizational or market factors when women lead and could make it more difficult for women in executive leadership roles to demonstrate their value to the firm.”

Previous studies have examined the gender pay gap at the executive level in terms of annual salary rather than total compensation, which includes severance pay agreements. This research underscores the need to take a more holistic view of compensation and paves the way for future studies that examine processes behind how severance agreements are formed and executed, with particular attention paid to how these processes can disadvantage certain groups.

Jennifer Griffith of the University of New Hampshire, Stephane Shipe of Wake Forest University, Matthew Crayne of the University at Albany – SUNY, Rachael Campagna of the University of New Hampshire, and Tristan McIntosh of Washington University in St. Louis also contributed to this study. The full article can be read in the Journal of Business and Psychology.