Francesca Toscano and Sungjoung Kwon accepted for publication in the Journal of Banking and Finance

Francesca Toscano and Sungjoung Kwon, both Assistant Professor of Finance at the Mike Ilitch School of Business, had their paper, "Corporate Social Responsibility and the Executive-Employee Pay Disparity," accepted for publication in the Journal of Banking and Finance. This research explores the impact of employee-related Corporate Social Responsibility (ER-CSR) on pay disparity between top management and average workers, finding firms with higher ER-CSR ratings have a lower pay disparity.

Abstract:

We examine the impact of employee-related Corporate Social Responsibility (ER-CSR) on pay disparity between top management and the average worker. Firms with higher ER-CSR ratings have a lower pay disparity and the effect is greatest when executives are paid the most. ER-CSR is associated with a lower ratio of top management's cash and long-term incentive compensation, relative to the average employee's pay. We find that the negative relation is driven by socially responsible firms paying their average employees more. Finally, we document that CSR activities related to employee relations and diversity are those leading to a significant pay disparity reduction.

-Jannet Hurtado-Blanco