Spinning the CEO Pay Ratio Disclosure

57 Pages Posted: 11 Nov 2019 Last revised: 7 Apr 2020

See all articles by Audra L. Boone

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business; European Corporate Governance Institute (ECGI)

Austin Starkweather

University of South Carolina Moore School of Business

Joshua T. White

Vanderbilt University - Owen Graduate School of Management

Date Written: April 6, 2020

Abstract

We examine the real effects of disclosing information about the pay gap between the CEO and employees. Firms reporting higher pay ratios tend to include discretionary narrative portraying their employee relations or compensation practices in a positive light. Reporting higher ratios is associated with negative changes in the tone of media coverage, shareholder voting on executive compensation, and employee productivity and morale. Spinning the pay ratio disclosure fails to attenuate these negative outcomes. Our findings suggest that the disclosure of the ratio, rather than vertical pay disparity alone, explains the negative stakeholder response.

Keywords: CEO pay ratio, disclosure, executive compensation, pay disparity, inequality, employee compensation

JEL Classification: G34, G38, J31, J38, J58, M12, M52

Suggested Citation

Boone, Audra and Starkweather, Austin and White, Joshua T., Spinning the CEO Pay Ratio Disclosure (April 6, 2020). Available at SSRN: https://ssrn.com/abstract=3481540 or http://dx.doi.org/10.2139/ssrn.3481540

Audra Boone (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Austin Starkweather

University of South Carolina Moore School of Business ( email )

1014 Greene St
Columbia, SC 29208
United States

HOME PAGE: http://www.astarkweather.com

Joshua T. White

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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