Executive Greed and a Powerful Cause for More Pay: An Empirical Investigation into Human Wage Setting Behaviour and a Better Alternative to Minimum Wages

26 Pages Posted: 20 May 2014

Date Written: May 19, 2014

Abstract

There is widespread assumption that executives are greedy and that it is executive greed that has led to widespread spiralling executive pay. This paper offers an alternative explanation for today’s extraordinary high levels of executive pay: Pay transparency.

Pay transparency increases executive pay by as much as 23.0% compared to only 6.9% when wages are not transparent based on over 308 treatments in 7 behavioural experiments. We call this wage increase the Wage Anchor Effect. Men are 40% more affected by the Wage Anchor Effect than women.

While lower for lower paid jobs, the wage increasing Wage Anchor Effect exists even there (we used babysitters and cleaning staff as job examples). Therefore, pay transparency could help lower-paid workers with higher wages which may not have the negative side effects of minimum wages.

Keywords: minimum wage, executive compensation, remuneration, greed, anchor effect, priming effect, behavioural economics, experiments, empirical research

JEL Classification: G34, J33, M52, J33, G31, M12, M10

Suggested Citation

Stern, Hermann J., Executive Greed and a Powerful Cause for More Pay: An Empirical Investigation into Human Wage Setting Behaviour and a Better Alternative to Minimum Wages (May 19, 2014). Available at SSRN: https://ssrn.com/abstract=2437870 or http://dx.doi.org/10.2139/ssrn.2437870

Hermann J. Stern (Contact Author)

Obermatt Inc. ( email )

Schifflande 26
Zurich, 8001
Switzerland
+41 44 576 42 30 (Phone)

HOME PAGE: http://www.obermatt.com

Register to save articles to
your library

Register

Paper statistics

Downloads
63
rank
340,560
Abstract Views
481
PlumX Metrics