Cheating for the Cause: The Effects of Performance-Based Pay on Socially-Oriented Misreporting

The Accounting Review, https://doi.org/10.2308/TAR-2019-0357 Forthcoming

Posted: 6 Aug 2018 Last revised: 29 Jun 2021

See all articles by Jessen L. Hobson

Jessen L. Hobson

University of Illinois at Urbana-Champaign

Ryan Sommerfeldt

Washington State University

Laura W. Wang

University of Illinois at Urbana-Champaign

Date Written: December 1, 2020

Abstract

We examine the effect of performance-based pay on misreporting intended to benefit a social mission. We show that performance-based pay decreases people’s propensity to misreport for a social mission in a not-for-profit setting (Experiment 1). We similarly show that in a for-profit setting, performance-based pay also decreases misreporting propensity for a social mission; however, it does not decrease misreporting propensity for a non-social mission (Experiment 2). Finally, using a framed field experiment with participants attending a conference hosted by a real charity, we show that performance-based pay reduces actual misreporting when misreporting leads to more donations for the charity (Experiment 3). These results are consistent with our theory which suggests that, relative to fixed pay, performance-based pay imposes additional costs on misreporting employees’ self-concepts of benevolence and honesty.

Keywords: Social-mission organizations; Not-for-profit organizations; Performance-based pay; Misreporting; Socially-oriented misreporting; Framed Field Experiment

JEL Classification: C93; J33; L31; M4; M52

Suggested Citation

Hobson, Jessen L. and Sommerfeldt, Ryan and Wang, Laura W., Cheating for the Cause: The Effects of Performance-Based Pay on Socially-Oriented Misreporting (December 1, 2020). The Accounting Review, https://doi.org/10.2308/TAR-2019-0357 Forthcoming , Available at SSRN: https://ssrn.com/abstract=3226982 or http://dx.doi.org/10.2139/ssrn.3226982

Jessen L. Hobson

University of Illinois at Urbana-Champaign ( email )

4011 Business Instructional Facility
515 East Gregory Drive
Champaign, IL 61820
United States

Ryan Sommerfeldt (Contact Author)

Washington State University ( email )

Todd Hall 242
Pullman, WA 99164-4729
United States

Laura W. Wang

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States
4696844455 (Phone)

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