Income Inequality and the CEO Pay Ratio at TJX Cos
Citation:
Rouen, Ethan, and Akari Furukawa. "Income Inequality and the CEO Pay Ratio at TJX Cos." Harvard Business School Case 120-063, December 2019. View Details|
Article Accounting Review Forthcoming Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance |
Abstract
I develop measures of firm-level pay disparity and examine their relation to firm performance. Using comprehensive compensation data for a large sample of firms, I find no statistically significant relation between the ratio of CEO-to-mean employee compensation and performance. I next create empirical models that allow me to separate the components of CEO and employee compensation explained by economic factors from those that are not and use these models to estimate explained and unexplained pay disparity. After validating my estimate of unexplained pay disparity as a proxy for pay fairness, I find robust evidence of a negative (positive) relation between unexplained (explained) pay disparity and future firm performance.
Keywords: pay disparity; pay ratio; CEO pay ratio; income inequality; Executive Compensation; Employees; Wages; Equality and Inequality; Business Ventures; Performance;
Citation:
Rouen, Ethan. "Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance." Accounting Review (forthcoming).
