Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Consumers Punish Firms that Cut Employee Pay in Response to COVID-19
      30 Aug 2020Working Paper Summaries

      Consumers Punish Firms that Cut Employee Pay in Response to COVID-19

      by Bhavya Mohan, Serena Hagerty, and Michael Norton
      In the wake of COVID-19, firms announced both employee furloughs and (typically small) CEO wage cuts. This research shows that firms’ treatment of employees matters far more to consumers than executive pay cuts.
      LinkedIn
      Email

      Author Abstract

      Two experiments, including one incentive compatible study, examine the impact of cutting pay for executives versus employees in response to COVID-19 on consumer behavior. Study 1 explores the effect of announcing cuts or no cuts to CEO and employee pay, and shows that firms’ commitment to paying employees their full wages leads to the most positive consumer reactions. Study 2 further examines the effects of announcing employee and CEO pay cuts: though announcing CEO pay cuts in tandem with employee pay cuts can help mitigate the negative effects of employee pay cuts, consumers respond most positively to firms which prioritize paying employees regardless of their strategy for CEO pay. These positive perceptions are mediated by perceptions of financial pain to employees. We discuss the implications of our results for firms and policy-makers during economic crises.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: August 2020
      • HBS Working Paper Number: HBS Working Paper #21-020
      • Faculty Unit(s): Marketing
        Trending
          • 21 Apr 2021
          • Research & Ideas

          The Pandemic Conversations That Leaders Need to Have Now

          • 20 Apr 2021
          • Book

          A Simple Question That Can Guide Companies to Epic Success

          • 20 Apr 2021
          • Cold Call Podcast

          What Went Wrong with the Boeing 737 Max?

          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 08 Mar 2021
          • In Practice

          COVID Killed the Traditional Workplace. What Should Companies Do Now?

      Michael I. Norton
      Michael I. Norton
      Harold M. Brierley Professor of Business Administration
      Director of Research
      Contact
      Send an email
      → More Articles
      Find Related Articles
      • COVID-19
      • Consumer Behavior
      • Executive Compensation

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College