Academic Study Finds a Large Gender Gap in Corporate Severance Packages

A new study led by researchers at the University of Nebraska Omaha and the University of New Hampshire finds that male executives tend to get larger severance packages from U.S. companies than do their female counterparts.

Researchers found that on average, men in executive leadership positions received over $500,000 more in severance compensation than women in similar level positions. Researchers found that 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. The study also showed that women were at a disadvantage in negotiating better agreements and 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, associate professor of organizational behavior and management at the University of New Hampshire and co-author of the study. “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.”

“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,” said Kelsey Medeiros, assistant professor of management at the University of Nebraska Omaha and the study’s lead author. “That sort of impact can also tarnish the culture of an entire organization and make it difficult to attract and retain top talent.”

The full study, “Minding the ($500,000) Gap: Accounting for the Gender-Driven Gap in Executive Severance Agreements,” was published in the Journal of Business and Psychology. It may be accessed here.