How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

Kiatpongsan, Sorapop; Norton, Michael I.

doi:10.1177/1745691614549773

Cited by 247 publications

(241 citation statements)

References 3 publications

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“…One strand of this literature has relied on large, non-incentivized representative surveys, including the World Value Survey, the European Social Survey, the General Social Survey, and the International Social Survey Programme (Alesina, Glaeser, and Sacerdote, 2001;Alesina and Glaeser, 2004;Alesina and Giuliano, 2011;Aarøe and Petersen, 2014;Ashok, Kuzimko, and Washington, 2015;Corneo and Grüner, 2002;Edlund, 1999;Falk, Becker, Dohmen, Enke, Huffman, and Sunde, 2015;Fong, 2001;Kiatpongsan and Norton, 2014;Linos and West, 2003;Luttmer and Singhal, 2011;Osberg and Smeeding, 2006;Svallfors, 1997), while another strand has used incentivized lab-experiments on non-representative samples (Barrett, Bolyanatz, Crittenden, Fessler, Fitzpatrick, Gurven, Henrich, Kanovsky, Kushnick, Pisor, Scelza, Stich, von Rueden, Zhaog, and Laurence, 2016;Cappelen, Nygaard, Sørensen, and Tungodden, 2015;Farina, Grimalda, and Schmidt, 2016;Henrich, Boyd, Bowles, Camerer, Fehr, Gintis, McElreath, Alvard, Barr, Ensminger, Henrich, Hill, Gil-White, Gurven, Marlowe, Patton, and Tracer, 2005;Henrich, Ensminger, McElreath, Barr, Barrett, Bolyanatz, Cardenas, Gurven, Gwako, Henrich, Lesorogol, Marlowe, Tracer, and Ziker, 2010;Jakiela, 2015). We propose a new empirical approach for these types of studies that combines the strengths of the survey approach (large representative samples) and the lab experimental approach (incentivized choices).…”

Section: Introductionmentioning

confidence: 99%

Cutthroat Capitalism Versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking than Scandinavians?

2016

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There is a striking difference in income inequality and redistributive policies between the United States and Scandinavia. To study whether there is a corresponding cross-country difference in social preferences, we conducted the first large-scale international social preference experiment, with nationally representative samples from the United States and Norway. We introduce a new experimental approach, which combines the infrastructure of an international online market place and the infrastructure of a leading international data collection agency. A novel feature of our experiment is that Americans and Norwegians make real distributive choices in identical situations where they have complete information about the source of inequality and the cost of redistribution. We show that Americans and Norwegians differ significantly in fairness views, but not in the importance assigned to efficiency. The study also provides robust causal evidence of fairness considerations being much more fundamental for inequality acceptance than efficiency considerations in both countries.

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Section: Introductionmentioning

confidence: 99%

Cutthroat Capitalism Versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking than Scandinavians?

2016

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“…In the case of progressive redistribution (henceforth, redistribution)-a policy for which there is large worldwide demand (5,6)-the ostensible group-level goal is to even out a skewed statistical distribution by transferring resources from the better off to the less well off. However, it is possible that the public rationale for supporting a policy is distinct from the private or even nonconscious motives of individuals supporting (or opposing) it.…”

mentioning

confidence: 99%

Support for redistribution is shaped by compassion, envy, and self-interest, but not a taste for fairness

Sznycer

Seal

Sell

et al. 2017

Proc. Natl. Acad. Sci. U.S.A.

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Why do people support economic redistribution? Hypotheses include inequity aversion, a moral sense that inequality is intrinsically unfair, and cultural explanations such as exposure to and assimilation of culturally transmitted ideologies. However, humans have been interacting with worse-off and better-off individuals over evolutionary time, and our motivational systems may have been naturally selected to navigate the opportunities and challenges posed by such recurrent interactions. We hypothesize that modern redistribution is perceived as an ancestral scene involving three notional players: the needy other, the better-off other, and the actor herself. We explore how three motivational systems-compassion, self-interest, and envy-guide responses to the needy other and the better-off other, and how they pattern responses to redistribution. Data from the United States, the United Kingdom, India, and Israel support this model. Endorsement of redistribution is independently predicted by dispositional compassion, dispositional envy, and the expectation of personal gain from redistribution. By contrast, a taste for fairness, in the sense of (i) universality in the application of laws and standards, or (ii) low variance in group-level payoffs, fails to predict attitudes about redistribution.[M]ore recently the "Greatest happiness principle" has been brought prominently forward. It is, however, more correct to speak of the latter principle as the standard, and not as the motive of conduct.-Charles Darwin (1) W hy do people support social policies? One level of explanation addresses properties of populations that individual minds might process-local practices, shared beliefs and ideologies, collective identities, and recent history (2). A second, independent level of explanation asks which specific psychological mechanisms participate in forming the individual's response to a policy-that is, what interpretive, emotional, and motivational systems are activated by external inputs, shaping the response (3, 4). Here, we explore this second level of explanation. We investigate several evolved psychological mechanisms to see to what degree they pattern the individual's response to economic redistribution. We also investigate the extent to which a taste for fairness shapes support for redistribution.By economic redistribution, we mean the modification of a distribution of resources across a population as the result of a political process. In the case of progressive redistribution (henceforth, redistribution)-a policy for which there is large worldwide demand (5, 6)-the ostensible group-level goal is to even out a skewed statistical distribution by transferring resources from the better off to the less well off. However, it is possible that the public rationale for supporting a policy is distinct from the private or even nonconscious motives of individuals supporting (or opposing) it. It is important to recognize that such a transformation in the distribution of resources does not necessarily entail conservation of a fixed and ...

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“…Previous research suggests that consumers believe CEO pays ratios are far lower than they actually are; in fact, consumers' ideal ratio of CEO pay to average unskilled worker is 4.6 to 1, while their estimated actual ratio of CEO pay to average unskilled worker pay is 10 to 1 (Kiatpongsan and Norton 2014). Note that this ideal ratio is far lower than the average pay ratio across US firms, which is estimated to be approximately 331 to 1 (AFL-CIO 2014); indeed, one recent study uncovered large public firms with pay ratios ranging from 284 to 1 to 2239 to 1, when taking into account the value of base salary, cash bonuses, perquisites and the grant-date value of stock and option grants (Morgensen 2015).…”

Section: Pay Ratio Disclosure and Consumer Sentimentmentioning

confidence: 98%

“…Given the central role that ideology plays in consumption (Crockett and Wallendorf 2004;Hirschman 1993) and the fact that different persuasive messages have different appeal to different political affiliations (Kidwell, Farmer, and Hardesty 2013;Winterich, Zhang, and Mittal 2012), it is possible that while low pay ratios may appeal to liberal consumers, they may serve as a deterrent to more conservative consumers. At the same time, both liberal and conservative Americans' ideal pay ratios are far lower than current actual pay ratios (Kiatpongsan and Norton 2014), suggesting the possibility that low pay ratios may improve firm perceptions more broadly.…”

Section: Pay Ratio Disclosure and Consumer Sentimentmentioning

confidence: 98%

Paying Up for Fair Pay: Consumers Prefer Firms with Lower CEO-to-Worker Pay Ratios

Mohan

Norton²,

Deshpandé³

2015

SSRN Journal

Self Cite

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Prior research examining consumer expectations of equity and price fairness has not addressed wage fairness, as measured by a firm's pay ratio. Pending legislation will require American public companies to disclose the pay ratio of CEO wage to the average employee's wage. Our six studies show that pay ratio disclosure affects purchase intention of consumers via perceptions of wage fairness. The disclosure of a retailer's high pay ratio (e.g., 1000 to 1) reduces purchase intention relative to firms with lower ratios (e.g., 5 to 1 or 60 to 1, Studies 1A, 1B, and 1C). Lower pay ratios improve consumer perceptions across a range of products at different price points (Study 2A and 2B), increase consumer ratings of both firm warmth and firm competence (Study 3), and enhance perceptions of Democrats and Independents without alienating Republican consumers (Study 4). A firm with a high ratio must offer a 50% price discount to garner as favorable consumer impressions as a firm that charges full price but features a lower ratio (Study 5).

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How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

Cited by 247 publications

References 3 publications

Cutthroat Capitalism Versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking than Scandinavians?

Cutthroat Capitalism Versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking than Scandinavians?

Support for redistribution is shaped by compassion, envy, and self-interest, but not a taste for fairness

Paying Up for Fair Pay: Consumers Prefer Firms with Lower CEO-to-Worker Pay Ratios

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