Pay Ratio Research Articles

Employee Representation and the Manager-to-Worker Pay Ratio

Employee Representation and the Manager-to-Worker Pay Ratio

Pay Ratio and Operational Efficiency

Pay Ratio and Operational Efficiency

Corporate Social Responsibility and Pay Ratio: Why Do Socially Responsible Firms Pay Their Employees More

Corporate Social Responsibility and Pay Ratio: Why Do Socially Responsible Firms Pay Their Employees More

Labor Market Consequences of Pay Transparency: Evidence from the Initial Pay Ratio Disclosure

Labor Market Consequences of Pay Transparency: Evidence from the Initial Pay Ratio Disclosure

Pay Ratio Disclosure and Employee Turnover

Pay Ratio Disclosure and Employee Turnover

Unintended Consequences of CEO-Employee Pay Ratio Disclosure Mandate: Evidence from Shareholder Proposals

Unintended Consequences of CEO-Employee Pay Ratio Disclosure Mandate: Evidence from Shareholder Proposals

CEO Compensation and Say on Pay: Does CEO-to-Employee Pay Ratio Matters?

CEO Compensation and Say on Pay: Does CEO-to-Employee Pay Ratio Matters?

ESG (Environmental, Social, and Governance) Implementation to Strengthen Business Sustainability Pt. Migas–North Field

ESG implementation is one of factors in establishing a sustainable business. Businesses in Indonesia also need to implement ESG to achieve net zero emissions by 2026. This study describes the implementation of ESG (Environmental, Social, and Governance) to strengthen PT. Migas–North Field. This qualitative study uses an interview technique with 5 employees of PT Migas. This study focuses on the implementation of 30 indicators from ESG Reporting Guide 2.0. The findings show, in the environmental aspect, the indicators that have been practiced in the company consist of GhG emission, emission intensity, energy usage, energy intensity, energy mix, water usage, and environmental operation. While the indicator has not been practiced is climate oversight/board, climate oversight management, and climate risk mitigation. In the social aspect, the indicators that have been implemented by the company are the CEO Pay Ratio, Gender Pay Ratio, Temporary Worker Ratio, Non-discrimination, Injury Rate, Child & Forced Labor, Global Health & Safety, and Human Rights. While the indicators of Gender Diversity and Employee Turnover have not been implemented. In the governance aspect, the indicators that have been implemented by the company are Board Independence, Collective Bargaining, Supplier Code of Conduct, Ethic & Anti-Corruption, and Data Privacy. While the indicators that have not been implemented are Board Diversity, ESG Reporting, Disclosure Practice, Incentivized Pay, and External Assurance. All of indicators above actually have an urgency to be implemented in order to create business sustainability.

Pay ratio and operational efficiency

Pay ratio and operational efficiency

Employee Responses to Increased Pay Transparency: An Examination of Glassdoor Ratings and the CEO Pay Ratio Disclosure

Employee Responses to Increased Pay Transparency: An Examination of Glassdoor Ratings and the CEO Pay Ratio Disclosure

Pengaruh Rentabilitas dan Ukuran Perusahaan terhadap Return Saham dengan Kebijakan Dividen sebagai Variabel Moderating

The purpose of this study was to examine the effect of profitability and firm size on stock returns with dividend policy as a moderating variable. This study uses a sample of food and beverage companies listed on the Indonesia Stock Exchange (IDX) for the 2018-2019 period. The sampling method in this study used purposive sampling. The number of samples in this study were 12 companies. Hypothesis testing in this study used multiple linear regression methods and moderated regression analysis. The results of this study indicate that profitability is proxied to ROA and firm size has no effect on stock returns. Dividend policy is not able to moderate profitability as a proxy for ROA and firm size on stock returns. The coefficient of determination (R2) is known to be 0.48 or equal to 48%. This means that the Dividend Pay Ratio moderates the effect of Return on Assets by 48% on Stock Return, while the remaining 52% is influenced by other variables outside of this study.
 Keywords: profitability, return on assets, size and, dividend pay ratio

Does Sensationalism Affect Executive Compensation? Evidence from Pay Ratio Disclosure Reform

ABSTRACTBeginning in 2018, U.S. public firms were required to report the ratio of the chief executive officer's (CEO) compensation to their median employee's compensation in the annual proxy statement. Exploiting the staggered reporting of pay ratios, we find little evidence that total CEO compensation changes in response to pay ratio disclosure reform. However, we do find that boards significantly adjust the mix of compensation awarded by reducing the sensitivity of CEO pay to equity price changes, particularly when the CEO is likely to garner media scrutiny, and by reducing reliance on stock‐based and other compensation components that are most susceptible to media coverage surrounding the pay ratio disclosure. Firms ultimately disclosing higher pay ratios garner more media coverage around the filing of their proxy statement, and more negative‐toned coverage in the subsequent month. Finally, we find evidence that greater pay disparity is associated with greater selling activity by retail investors and more negative say‐on‐pay votes following pay ratio reform, consistent with a broad set of investors responding to public scrutiny resulting from pay ratio disclosures.

Enhancing Activity in the Right Temporoparietal Junction Modifies the Effect of a High CEO-to-Employee Pay Ratio on the Perceived Investment Potential in the Construction Industry.

As an increasing number of governments require the disclosure of companies’ compensation information, compensation management is becoming an important part of internal management in the construction industry. Although the literature has shown that disclosing a high CEO-to-employee pay ratio will cause various effects on the decision-making of a company’s potential investors, there is little evidence on the neural basis of such effects. Given that previous neuroscience studies have shown that the right temporoparietal junction (TPJ) is associated with altruistic behaviors, this study used transcranial direct current stimulation (tDCS) to explore the role of the right TPJ in the effects of the CEO-to-employee pay ratio on potential investors’ perceived investment potential in the construction industry. The results show that enhancing activity in the right TPJ significantly reduced the perceived investment potential of female participants, especially those with no investment experience, when the company’s CEO-to-employee pay ratio is high compared to when the pay ratio is medium. This effect was not observed in male participants. The mechanisms underlying these effects of tDCS in the right TPJ on the perceived investment potential were also explored. The main contribution of this study lies in its pioneering exploration of the neural basis of investment decision-making regarding the CEO-to-employee pay ratio. Additionally, it reveals individual feature-based differences in the role of the TPJ in investment decision-making and its possible mechanisms.

Do Equity Markets Care about Income Inequality? Evidence from Pay Ratio Disclosure

ABSTRACTWe examine equity markets’ reaction to the first‐time disclosure of the CEO‐worker pay ratio by U.S. public companies in 2018. We find that firms disclosing higher pay ratios experience significantly lower abnormal announcement returns. Firms whose shareholders are more inequality‐averse experience a more negative market response to high pay ratios. Furthermore, during 2018 more inequality‐averse investors rebalance their portfolios away from stocks with a high pay ratio relative to other investors. Our results suggest that equity markets are concerned about high within‐firm pay dispersion, and investors’ inequality aversion is a channel through which high pay ratios negatively affect firm value.

Internet Appendix for 'Does Sensationalism Affect Executive Compensation? Evidence from Pay Ratio Disclosure Reform'

Internet Appendix for 'Does Sensationalism Affect Executive Compensation? Evidence from Pay Ratio Disclosure Reform'

The Controversy of Executive Remuneration: Pay Ratios and Other Approaches

The regulation of executive pay needs a radical rethinking. Due to the current emphasis on the consequences of the pandemic on companies, and the calls for fairer pay designs, increased scrutiny of pay, pay gap reporting and accompanying narratives is inevitable. Adopting a clear policy on pay can prove a solid tool in promoting positive perceptions and encouraging a persuasive response to any adverse scrutiny of pay issues. Yet, regulating executive pay is a balancing act. Societies and the law must preserve companies’ freedom to decide their own executives’ pay whilst safeguarding fairness within pay structures. Clearly, in making laws on executive pay, governments in western economies must accommodate for many conflicting policy views and variables: whether to allow company boards to exercise their powers of management free of (further) government limitation, or to extend regulation in order to tackle the general public’s concern over executive greed and unethical pay structures. Criminal and civil enforcement, Fraud, Game theory, HMRC, Tax returns.

Untangling innovation: an examination of compensation, corporate social responsibility, and corporate financial performance

PurposeThis study aims to examine how highly innovative firms behave differently from their peers to become profitable. The authors investigate this through two distinct groups, one group of firms that have appeared on the Forbes 100 most innovative firms for 5 out of the past 10 years and a carefully curated control group.Design/methodology/approachUsing a matched sample of 190 distinct firms, all with 10 years of historical data, the authors conduct a series of regressions and two mediated models. This method enables the examination of several possible differentiators for highly innovative firms, namely, CEO Pay, CEO Pay Ratio, Median Employee Pay and Corporate Social Responsibility (CSR).FindingsIn all, the authors conducted five separate hypothesis tests, all with statistical significance. Of note, the authors find innovative companies do pay employees more, engage in more CSR acts and are more profitable than peer companies. In a mediated regression model, the authors also find that the median employee pay fully mediates the relationship between firm innovation and corporate financial performance.Research limitations/implicationsThe study first shows that these highly innovative firms do not reach a position to rely merely on their innovation reputation to be profitable or attract eager employees. The authors find no relationship between years on the Forbes 100 list and profitability, median pay or total CSR in the data.Practical implicationsThis research uses commonly available data to explore how innovative firms behave. Rather than being single-mindedly focused on innovation, results indicate that innovative elite firms are more generous (in employee pay) and concerned about non-profit factors (CSR) than their peers. Innovative firms are then able to do all this and remain profitable. An additional implication of this research is that managers should prioritize CSR. CSR is not just a tool for less innovative companies to distinguish themselves or firms with low reputations to rehabilitate themselves.Social implicationsAs a society, we are living through unprecedented times concerning how we treat one another in the world. Often, the argument is made that firms should specialize, optimize and be strategically focused. However, highly innovative firms (often regarded as focused, specialized and optimized) in the sample show that paying people more and carrying out CSR is highly compatible with their success.Originality/valueTo the best of the researchers’ collective knowledge, this study is the only one of its kind to create and use such a robust data set, obtaining data from four different sources, namely, 10 years of Forbes top 100 innovative companies, SEC filing of the DEF 14 A for each company for two years, the Kinder, Lyndenberg and Domini database for 10 years and Compustat data for 10 years.

Changing the Blame Game: Does the Presence of a Pay Ratio Disclosure Impact Nonprofessional Investors' Reactions to CEOs' Internal Attributions for Poor Firm Performance?

ABSTRACT We conduct two experiments to investigate how the presence of the CEO pay ratio, a recently mandated disclosure, influences nonprofessional investors' reactions to a CEO's internal attributions for poor firm performance. Results of our first experiment suggest that relative to blaming oneself, blaming other firm employees for poor firm performance more effectively absolves a CEO from responsibility for poor firm performance and damages perceptions of the CEO's trustworthiness less when a pay ratio disclosure is present versus absent. These perceptions, in turn, affect investors' support for the CEO's compensation and the company's attractiveness as an investment. Our second experiment provides evidence of the underlying process, showing the pay ratio disclosure and the CEO's attribution to other employees affects the perceived status of a CEO. Together, our findings inform managers about the impact of their attributions for poor firm performance and regulators about potential unintended consequences of pay ratio disclosures. Data Availability: Contact the authors. JEL Classifications: G40; M41; M52.

CEO-To-Worker Pay Ratio, Say On Pay Votes, and Executive Compensation

This study investigates the extent to which the CEO-to-Worker pay ratio affects shareholders’ say on pay votes and consequently examine whether shareholder opposition to pay gaps influence future CEO compensation. The effects of the implementation of the CEO-to-Worker pay ratio disclosure rule (2017) and the Portland Surplus tax (2018) are also discussed. We employ a large and up-to-date sample of US Russell 3,000 companies with 13,885 firm-year observations from 2011 to 2018. We develop and employ a unique measure of the CEO-to-Worker pay ratio allowing us to study time-periods for which data is not available. Using different quantitative estimation methods, we found that the CEO-to-Worker pay ratio is significantly and positively associated with shareholder dissent votes and that a pay gap opposition from shareholders is negatively and significantly associated with future CEO compensation. In addition, mandatory disclosure of the CEO-to-Worker pay ratio has increased the number of shareholder dissent votes the year after its implementation in 2017. By contrast, companies identified by the Portland Surplus tax have not shown higher shareholder dissent votes nor lower future CEO compensation compared to the Russell 3,000 companies. This study has important implications for the corporate governance literature, corporate directors, and policymakers.

Why Do Firms Utilize the Flexibility Allowed in CEO-Employee Pay Ratio Disclosure? Evidence from Dodd-Frank Act Section 953 (b)

SYNOPSIS Section 953 (b) of the Dodd-Frank Act requires all listed firms to disclose a CEO-employee pay ratio. Firms are given the flexibility to use permitted discretions in their required pay ratio calculation and to disclose a supplementary pay ratio if necessary. We analyze the CEO-employee pay ratio disclosure of S&P 1500 firms with fiscal year-ends from December 31, 2017, through December 31, 2018. We find that both informational and opportunistic motives affect firms' supplementary pay ratio disclosure, while informational motives appear to dominate firms' use of permitted discretions. Firms consider political costs when utilizing the flexibility in the pay ratio disclosure. Firms with labor market signaling incentives disclose a supplementary pay ratio that is higher than the required pay ratio. The supplementary pay ratio, when issued, captures a firm's economic pay disparity better than the required pay ratio and is positively associated with subsequent firm performance. Data Availability: Data are available from public sources indicated in the text.