Zinat S. Alam, Chinmoy Ghosh, Harley E. Ryan, Lingling Wang
{"title":"CEO Pay Ratio Estimation under Social Pressure","authors":"Zinat S. Alam, Chinmoy Ghosh, Harley E. Ryan, Lingling Wang","doi":"10.2139/ssrn.3771515","DOIUrl":null,"url":null,"abstract":"We show that firms report lower CEO-employee pay ratios when they use complex methods to identify the median employee, whose total pay is the denominator in the ratio. Firms choose complex methods when their headquarter states have stronger prosocial attitudes toward income equality and when CEO compensation is higher. Neither industry nor compensation design differences explain this choice. We find no evidence that firms make pay changes to reduce the pay differential between CEOs and general employees. Together, our results suggest that some firms strategically estimate pay ratios in response to social pressure, which alters the efficacy of compensation disclosure.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2021-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Corporate Governance: Social Responsibility & Social Impact eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3771515","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 1
Abstract
We show that firms report lower CEO-employee pay ratios when they use complex methods to identify the median employee, whose total pay is the denominator in the ratio. Firms choose complex methods when their headquarter states have stronger prosocial attitudes toward income equality and when CEO compensation is higher. Neither industry nor compensation design differences explain this choice. We find no evidence that firms make pay changes to reduce the pay differential between CEOs and general employees. Together, our results suggest that some firms strategically estimate pay ratios in response to social pressure, which alters the efficacy of compensation disclosure.
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