This paper examines the effect of the proportionof females in the establishment on the male/female wage gap and the effectiveness of an affirmaive action program in reducing this gap. A unique data set makes this paper possible since it has information on both individuals and the establishments they work for. The paper documents a significant difference in the sex composition of the establishments in which males and females work. Further, it is shown that the proportion of females in the establishment is negatively related to the wages of both males and females and accounts for 26 percent of the gap in log wages between men and women. Due to an inadequacy of the traditional method of decomposing wages when examining an affirmative action program, a new method of decomposition is developed: the characteristic wage decomposition. The results suggest that an employment equity program will reduce the male/female log wage gap by 20 percent.