The gender pay gap not only continues after the corporate world’s glass ceiling has shattered, but evidence points to larger gender disparities at executive levels than at working-class jobs.

Even more, research shows a factor possible to blame is upper management’s rising use of incentive pay – in the form of stock options and stock grants – which is also linked to heightened income inequality.

The link between incentive pay and gender gaps for top executives is explored in a paper I co-wrote with Stefania Albanesi and Claudia Olivetti: “Gender and Dynamic Agency: Theory and Evidence on the Compensation of Top Executives,” published last year in Research in Labor Economics.

Not Quite at the Top of a Shorter Company Ladder

It has been well-documented there are significant gender differences in the level of compensation for professional and managerial personnel. Three quarters of the 45-percent gender differential can be accounted for by the size and industry distribution of female executives. Specifically, women usually work in smaller firms and are less likely to reach the level of CEO (and other top jobs).

Of the remaining gender differential, explaining a large part is that female top executives are younger and have fewer years of tenure. This is due in part to women exiting the field – perhaps to have children; the so-called “mommy track” – at higher rates than men.

However, another study found that once executive rank and background are taken into account, women earn higher compensation than men and are promoted quicker, but experience more income uncertainty.

A Rising Tide Does Not Lift All Boats

In this current research, three new facts were learned about gender differences in the structure of executive compensation:

• Female executives receive lower share of incentive pay in total compensation relative to men. Unlike the wage disparity between men and women rising up the org chart at the same rate, the gap in the value of accumulated stock options/grants is not explained by differences between the genders in title, age and tenure. This difference accounts for 93 percent of the gender gap in total pay.

• The compensation of female executives displays lower pay-performance sensitivity. For male executives, a $1-million increase in firm value generated, on average, a $17,150 increase in firm-specific wealth – but for women, the increase was just $1,670.

• Women also bear the financial brunt of poor firm performance, compared to male executives paid more than their share when times are good. For female and male executives, a 1-percent rise in firm value is associated with, respectively, a 13-percent and 44-percent rise in firm-specific wealth. Yet a 1-percent decline in firm value is associated with a 63-percent decline in firm-specific wealth for female executives, compared to a 33-percent decline for males.

Additionally, no link was found between firm performance and the gender of top executives.

These findings came from studying executives employed at Standard & Poor’s firms between 1992 and 2005, according to the database ExecuComp. Only 3.2 percent of these executives were women.

Can Gender Differences in Preferences or Effort Explain These Gaps?

Previous research has found that women are less likely to enter competitive environments and seek challenges than men, and may be less effective than men in competitive environments even if they demonstrate the same ability to perform in noncompetitive environments. Additionally, other evidence suggests women exhibit lower propensity to initiate negotiations.

However, these gender differences are not enough to explain all the differences in pay structure. This was tested in the context of the efficient contracting theory, in which executive compensation optimally balances insurance and incentives, and considers how effort affects firm performance.

Then What Does Explain the Difference?

Surveys of professionals and executives suggest substantial barriers to career advancements for female executives include exclusion from informal networks, gender stereotyping and lack of role models. From these, combined with previously mentioned factors, gender differences in compensation can be explained by another theory: the “managerial power” view of executive compensation.

According to this theory, board members are captive to the CEO, so managers can influence their compensation packages to increase their average pay and undermine incentives. The goal of the executive is to prevent pay from going down when firm performance is suffering and trying to boost pay when the company is doing well. For top female executives, this means if they are less entrenched than their male counterparts they have less ability to control their own compensation.

Where Do Women Go From Here?

These findings underline the importance of transparency in the processes of setting corporate compensation. They also should concern professional women, as the use of incentive pay grows beyond the executive ranks. Pay and performance are not always linked accurately, as evident in the efficient contracting paradigm’s failure to explain the gender differences in the structure of executive compensation.

To the extent that performance pay amplifies earnings differentials resulting from effective or perceived differences in attributes across workers, if designed incorrectly it can exacerbate inequality and can distort the allocation of resources.