Pay dispersion and CSR

Abstract

Inspired by social comparison theory, this study examines how the pay dispersion among top executives affects critical strategic decisions regarding corporate social responsibility (CSR) in the US. The results indicate that highly dispersed executive pay evokes a sense of unfairness that drives executives to pursue personal rather than stakeholder interests by ignoring signals of unethicality. The effects are more pronounced for firms that have higher agency costs, because they are less able to monitor their executives. This study contributes to the CSR and pay dispersion literature by showing how pay dispersion is associated with executive decisions regarding CSR.