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Corporate social responsibility and the executive-employee pay disparity

Author

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  • D'Mello, Ranjan
  • Kwon, Sungjoung
  • Toscano, Francesca

Abstract

We examine the impact of employee-related Corporate Social Responsibility (ER-CSR) on pay disparity between top management and the average worker. Firms with higher ER-CSR ratings have a lower pay disparity and the effect is greatest when executives are paid the most. ER-CSR is associated with a lower ratio of top management's cash and long-term incentive compensation, relative to the average employee's pay. We find that the negative relation is driven by socially responsible firms paying their average employees more. Finally, we document that CSR activities related to employee relations and diversity are those leading to a significant pay disparity reduction.

Suggested Citation

  • D'Mello, Ranjan & Kwon, Sungjoung & Toscano, Francesca, 2024. "Corporate social responsibility and the executive-employee pay disparity," Journal of Banking & Finance, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:jbfina:v:162:y:2024:i:c:s0378426624000748
    DOI: 10.1016/j.jbankfin.2024.107154
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    More about this item

    Keywords

    Corporate social responsibility; Executive–employee pay disparity; Income Inequality;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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