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

43 Pages Posted: 6 Aug 2018 Last revised: 14 Jun 2019

See all articles by Jessen L. Hobson

Jessen L. Hobson

University of Illinois at Urbana-Champaign

Ryan Sommerfeldt

University of Illinois at Urbana-Champaign

Laura W. Wang

University of Illinois at Urbana-Champaign

Date Written: June 12, 2019

Abstract

Two potential motivations underlie performance misreporting in organizations advancing a social mission: self-interest and social benefits. Prior studies, focusing on misreporting motivated by self-interest, suggest that performance-based pay incentivizes misreporting. In contrast, we predict that performance-based pay will decrease misreporting intended to benefit a social mission. In two experiments in which participants are motivated to misreport for the benefit of a social mission, participants have a lower propensity to misreport when they receive performance-based pay and derive a personal benefit from misreporting than when they receive fixed pay and do not derive a personal benefit from misreporting. Mediation results suggest that performance-based pay decreases socially-oriented misreporting by (1) reducing the benefit of misreporting to one’s self-concept of benevolence and (2) increasing the cost of misreporting to one’s self-concept of honesty. Our results have important implications for compensation designs at and audits of nonprofit organizations that advance an important social mission.

Keywords: Nonprofit 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 (June 12, 2019). AAA 2019 Management Accounting Section (MAS) Meeting. 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)

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Laura W. Wang

University of Illinois at Urbana-Champaign ( email )

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

Register to save articles to
your library

Register

Paper statistics

Downloads
36
Abstract Views
329
PlumX Metrics