(The) impact of executive pay dispersion on corporate social responsibility

Abstract

The literature posits that pay dispersion stimulates employees to work hard by playing a role as a prize of tournaments. In contrast, other stream of literatures claim that pay dispersion provokes bad feelings around employees by making an atmosphere of inequity and injustice. Based on social comparison theory, this research proves that executive pay dispersion negatively effect firms’ CSR decision, by making executive members feel bad, leading them to pursuit their own interests rather than long-term stakeholder satisfaction. Moreover, this study focused on agency issue, since executives are subject to agency conflicts. I found that the negative impact of executive pay dispersion on CSR is pronounced for firms with higher agency costs, since they are difficult to monitor their executives’ efforts.