CEO pay ratio voluntary disclosures and stakeholder reactions

Lisa LaViers (), Jason Sandvik () and Da Xu ()
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Lisa LaViers: Tulane University’s A.B. Freeman School of Business
Jason Sandvik: University of Arizona’s Eller College of Management
Da Xu: Tsinghua University’s School of Economics and Management

Review of Accounting Studies, 2024, vol. 29, issue 1, No 4, 109-150

Abstract: Abstract Since 2018 the Security and Exchange Commission has required firms to disclose the ratio of their chief executive officer’s and median employee’s pay. This rule was enacted to address increasing concerns from investors about the human capital management practices of firms. Due to the uncertainty surrounding the ratio’s interpretation, some managers provide voluntary disclosures to complement and clarify their mandatory disclosures. We document this behavior by manually inspecting the proxy statements of all firms in the S&P 1500. We predict and find that a firm’s propensity to provide voluntary disclosures increases in the magnitude of its pay ratio. This relation is only present, however, when voluntary disclosures contain firm-specific information, as opposed to boilerplate information that is similar across firms. In line with these findings, we show that investors react differently to firm-specific disclosures than to boilerplate disclosures, especially when firms have relatively large CEO pay ratios. We also show that voluntary disclosure provision impacts compensation-related media coverage.

Keywords: CEO pay ratio; Pay fairness; Voluntary disclosure; Executive compensation (search for similar items in EconPapers)
JEL-codes: G14 G23 G41 J31 M41 M48 M52 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11142-022-09720-1

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