Corporate Social Responsibility and the Executive-Employee Pay Disparity

85 Pages Posted: 19 Apr 2023 Last revised: 4 Mar 2024

See all articles by Ranjan D'Mello

Ranjan D'Mello

Wayne State University - Department of Finance

Sungjoung Kwon

Wayne State University - Mike Ilitch School of Business

Francesca Toscano

Wayne State University - Mike Ilitch School of Business

Date Written: March 20, 2023

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 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.

Keywords: Corporate Social Responsibility, Executive–Employee Pay Disparity, Income Inequality

JEL Classification: M14, G03, G41

Suggested Citation

D'Mello, Ranjan and Kwon, Sungjoung and Toscano, Francesca, Corporate Social Responsibility and the Executive-Employee Pay Disparity (March 20, 2023). Available at SSRN: https://ssrn.com/abstract=4407006 or http://dx.doi.org/10.2139/ssrn.4407006

Ranjan D'Mello (Contact Author)

Wayne State University - Department of Finance ( email )

2771 Woodward Ave
Mike Ilitch School of Business
Detroit, MI 48201
United States
313-577-7828 (Phone)

Sungjoung Kwon

Wayne State University - Mike Ilitch School of Business ( email )

2771 Woodward Ave
Detroit, MI 48201

Francesca Toscano

Wayne State University - Mike Ilitch School of Business ( email )

2771 Woodward Ave
Detroit, MI 48201
United States

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