Researchers Just Found This Wealth Gap May Be Worse For You Than the Pay Gap
It's no secret that Silicon Valley has a lot of gender disparities — women are underrepresented and underpaid. But new research finds a perhaps even more dire gap than the pay gap when it comes to wealth: a gap in equity packages.
A blog post in March from the #Angels, six women who took on angel investing as a sideline after meeting at Twitter Inc., prompted the study by equity management platform Carta. The post delineates the ways in which people can actually start companies and invest in others — and that largely has to do with good equity packages, which disproportionately go to men.
“This isn’t just about wealth creation,” says Chloe Sladden, the #Angel who formerly oversaw Twitter’s media partnerships. “This is about the ability to influence Silicon Valley, the products, and the people who, more and more, are shaping the world.”
While equity in a risky startup typically ends up worth zero, when a startup goes public or gets bought, that equity can end up being worth far more than what's written on one's paychecks. But, according to the research, which looked at data from almost 180,000 employees at more than 6,000 companies, women hold only 47 cents for every dollar of equity men do. This means that women hold only 20 percent of employee equity, though they make up 35 percent of equity-holding employees.
The Carta study also found that women make up 43 percent of employees at companies with more than 400 people on average, but they only comprise 29 percent of employees at companies with 10 people or fewer—which means that they're already underrepresented in startup culture.
Research suggests that the gender imbalance fuels a systematical bias against female entrepreneurs. According to a 2016 report from CrunchBase, which examined the gender dynamics at top venture capital firms and how their money is distributed, only a mere seven percent of VC partners are women. Companies pitched by men were about 40 percent more likely to receive funding than those led by women.
While female founders tend to hire more women (they make up 13 percent of founders), they are far less likely to get funding (they hold only six percent of founder equity). While venture capitalists invested more than $58 billion in startups last year, for example, women only got two percent of that money, according to a study published in the Harvard Business Review.
But a good equity package can double or even triple one's earnings.
During the salary negotiation process, equity (including when additional grants of stock are used as bonuses) adds another layer to the conversation. “It’s information asymmetry squared,” Mary Russell, a lawyer in Palo Alto, California, who helps workers negotiate compensation, told Bloomberg. “You have to have the confidence to put the responsibility on the company to give you enough information.”
That women only make, on average, 80 cents for every dollar a man, is dwarfed by the potential wealth gap a lack of equity can create. Because women receive fewer investments and less equity, it can lead to less money for them in the long run.
A wealth of research shows that women already do ask for raises just as much as men, and they're just not given them. This research suggests that women ask for better equity packages, too.
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AnnaMarie Houlis is a multimedia journalist and an adventure aficionado with a keen cultural curiosity and an affinity for solo travel. She's an editor by day and a travel blogger at HerReport.org by night.
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