The Effect of Pay Transparency on Employee Integrity: Taking Social Mindfulness into Account

Abstract

Extending prior research on the role of injustice perceptions and negative emotions in explaining the positive effect of pay transparency on pay-disadvantaged employees’ unethical behavior, we examine a more automatic process – (decreased) social mindfulness – as further explaining this effect. Two simulation-based experiments using gig-workers, high in psychological involvement and realism, supported the mediating role of social mindfulness. Specifically, Study 1, manipulating employees’ pay to be lower relative to that of virtual teammates, provided casual evidence for the positive indirect effect of pay transparency (vs. secrecy) on employees’ unethical behavior towards unrelated peers (i.e., not one of their teammates) through (lower) social mindfulness. Study 2, a pre-registered experiment also using gig-workers, replicated this indirect effect with respect to behavior targeted against both related- (individuals observably paid more) and unrelated-peers (i.e., no knowledge of their pay), and found that it persisted even when taking the negative emotions resulting from injustice perceptions into account. Interestingly, Study 2 also indicated that the negative impact of pay transparency on social mindfulness and subsequent unethical behavior, is significantly more pronounced among individuals with average and high (rather than low) social value orientation. Theoretical and practical implications are discussed.