Misreporting of Mandatory ESG Disclosures: Evidence from Gender Pay Gap Information
66 Pages Posted: 22 Aug 2022 Last revised: 5 Apr 2024
Date Written: August 17, 2022
Abstract
We examine misreporting of ESG information, in the context of gender pay gap reporting. The UK government requires UK employers to report gender employment ratios and pay gaps. We find that a large number of employers misreport as evidenced by their reporting a set of disclosures that in concert are mathematically impossible. We also find that a disproportionate number of employers report perfectly-balanced gender statistics, consistent with some employers intentionally misreporting as a form of ESG-washing. We find that employers involved in ESG controversies and that commit labor violations are more likely to misreport, consistent with ethical considerations affecting misreporting. Consistent with capital market and media scrutiny discouraging misreporting, public employers, employers that are the subject of an article about their gender pay gap reports, and employers that receive an ESG audit or financial audit from a big-4 auditor are less likely to misreport. Employers that misreport receive higher ESG scores and are less likely to receive negative media attention, consistent with benefits of misreporting. Our results suggest that inferences drawn from measures of ESG performance collected by second parties or on information self-reported in the presence of meaningful oversight are particularly valuable.
Keywords: gender pay gap; ESG; ESG washing; social responsibility; misreporting; gender representation; mandatory disclosure
JEL Classification: G38; L21; M14; M41; M48
Suggested Citation: Suggested Citation