Racial Diversity and Inclusion Without Equity? Evidence from Executive Compensation

Posted: 6 Sep 2023 Last revised: 4 Oct 2023

See all articles by Felipe Cabezon

Felipe Cabezon

Virginia Tech - Pamplin College of Business

Eliezer M. Fich

Drexel University - Department of Finance

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business; University of Pennsylvania - Wharton Financial Institutions Center

Date Written: September 1, 2023

Abstract

We find that the compensation structure of top managers (except CEOs) varies according to ethnicity/race. On average, Blacks, Hispanics, Asians, and Native Americans receive less equity-based pay than White executives in the same firm. Companies headquartered in high racism areas have more dissimilar pay structures. As the pay structure similarity decreases, the pay gap between White and ethnic-minority executives increases. Firms with more similar racial pay structures in their C-suite, exhibit higher stock market valuations, better operating performance, less financial fraud, and lower CEO-to-median-worker pay ratios. Racial pay structures are more similar in C-suites led by an ethnic-minority CEO.

Keywords: Race; Ethnicity; Diversity, equity, and inclusion; DEI; Executive Compensation; CEO Pay Ratio

JEL Classification: M12, J31, J33, J41, G34, G30, G32, J16

Suggested Citation

Cabezon, Felipe and Fich, Eliezer M. and Litov, Lubomir P., Racial Diversity and Inclusion Without Equity? Evidence from Executive Compensation (September 1, 2023). Available at SSRN: https://ssrn.com/abstract=4559176

Felipe Cabezon

Virginia Tech - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States

Eliezer M. Fich (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)

HOME PAGE: http://https://sites.google.com/view/eliezerfich

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

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