The sports world has seen a lot of off-field events take on greater meaning. Colin Kaepernick’s decision to kneel during the US national anthem started a national conversation on what is effective civil disobedience. Go farther back, and Magic Johnson’s 1991 admission that he was HIV positive instantly grew awareness about the disease worldwide.
The latest sports controversy to cause debate looks to be the US women’s soccer team suing its own federation over pay. But while the lawsuit certainly will highlight how men and women do the same work, there’s another compensation issue that the lawsuit may highlight: both women and men getting underpaid if they are promoted from within. “If you get paid less at the beginning, you always get paid less in that job,” says Jane Stevenson, global leader for CEO Succession at Korn Ferry and vice chairman of the firm’s Board & CEO Services practice.
After the US Soccer Federation, the body that oversees the sport, identifies elite US women players, it effectively hires them to play for the national team. That guarantees them an annual salary with a nominal bonus for winning matches, which is in contrast to the top male players, whose arrangements are more like an agreement with an outside contractor. An elite men’s player gets almost nothing guaranteed but gets huge bonuses for making the national team, playing, and winning games.
The system, along with how much revenue each player generates from television, sponsorships, and ticket sales, is why a direct comparison between compensation of the men’s and women’s teams can be complicated. “If they are getting a salary, it should undoubtedly be equal. If the players comp is tied to the visibility or revenue generated from TV dollars, that’s a different story,” says Andrew Montag, senior associate in Korn Ferry’s Global Sports practice. (For its part, the federation has argued the arrangement has been part of a “fair” collective bargaining agreement between itself and the players.)
The women players have brought up the equal pay issue before and have forced changes in the past. However, the compensation system has mostly stayed intact. From critics’ perspective, US Soccer is not paying an internal candidate the same amount for a role that an external candidate would get.
“At some point, what they did in the past becomes less relevant. What is relevant is what they are creating today,” Stevenson says. “Compensation is supposed to be incentivizing, and in this situation, it isn’t.”
That type of system also occurs in places far removed from sports. For example, a Wharton School of the University of Pennsylvania study on hiring decisions in the investment banking industry found that external hires earn 18% to 20% more than existing employees promoted to similar positions. Those external hires often perform worse than internal candidates do as well, according to the research.
Stevenson says in some of her own CEO searches, internally promoted CEOs were given raises but still made far less than CEOs brought into similar-sized firms in the same industry. In some cases, it can take years for that internal CEO’s pay to reach what the outsider can make, despite the internal CEO delivering better results than the competitors. “At some point the women soccer players made it and should be compensated for doing so. In the corporate world, at some point a junior player has delivered and should be compensated for it,” Stevenson says.