Corporate Sustainability and CEO–Employee Pay Gap—Buster or Booster?

Fernando Gómez-Bezares, Wojciech Przychodzen and Justyna Przychodzen
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Fernando Gómez-Bezares: Department of Finance, University of Deusto, Avenida de las Universidades 24, 48007 Bilbao, Bizkaia, Spain
Wojciech Przychodzen: Department of Finance, University of Deusto, Avenida de las Universidades 24, 48007 Bilbao, Bizkaia, Spain
Justyna Przychodzen: University of Liverpool, Management Online Programme, Laureate Online Education, Haarlebergweg 23C, 1101 BH Amsterdam, The Netherlands

Sustainability, 2019, vol. 11, issue 21, 1-15

Abstract: There is a general agreement that extensive remuneration gaps may cause pressing environmental, social, and economic problems. Thus, a critical question to be answered is what is the effect of being at the forefront of corporate sustainability on the CEO–employee pay gap. This paper addresses the question by examining empirical evidence from 415 constituents of the S&P 1500 index over the years 2006–2016. For the above period, we found a positive relationship between a strong commitment to sustainable development at the firm level and the CEO–employee pay differential. Additionally, firms characterized by higher performance, growth potential, and financial robustness constituted more dispersed salary distribution environments. The findings also suggest that CEO gender has a significant effect on the pay gap with a moderating influence of female CEOs. The paper contributes to the literature by shedding additional light on the urgent need for the implementation of a limit capping the CEO–worker pay ratio at a certain, responsible level as one of screening criteria used by sustainability ranking providers. Furthermore, it also shows that leading corporations in the area of sustainability do not implement any serious solutions in the above area on their own accord.

Keywords: corporate sustainability; executive compensation; fairness; pay gap; corporate governance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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