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
      Paying Up for Fair Pay: Consumers Prefer Firms with Lower CEO-to-Worker Pay Ratios
      16 Jun 2015Working Paper Summaries

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

      by Bhavya Mohan, Michael I. Norton and Rohit Deshpandé
      The pay ratio of CEOs to average workers has long been a question of interest to both employees and investors. It also matters to consumers, as shown by new research conducted by the authors of this paper. A firm with a high (1000 to 1) ratio needs to offer a 50 percent discount in order to garner as favorable consumer impressions as a firm with a low (5 to 1) pay ratio. Even if pay ratio disclosure does not become legally mandated, these results suggest that firms with low pay ratios relative to competitors may wish to begin to disclose this information voluntarily.
      LinkedIn
      Email

      Author Abstract

      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 (Studies 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 consumer impressions as favorable as a firm that charges full price but features a lower ratio (Study 5).

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: May 2015
      • HBS Working Paper Number: 15-091
      • Faculty Unit(s): Marketing
          Trending
            • 13 Jan 2021
            • Research & Ideas

            How 'Small C' Change Can Beat Large-Scale Rebuilding

            • 11 Jan 2021
            • Research & Ideas

            Is A/B Testing Effective? Evidence from 35,000 Startups

            • 13 Jul 2020
            • Research & Ideas

            Merck CEO Ken Frazier Discusses a COVID Cure, Racism, and Why Leaders Need to Walk the Talk

            • 29 Oct 2020
            • Research & Ideas

            The COVID Gender Gap: Why Fewer Women Are Dying

            • 06 Jan 2021
            • Research & Ideas

            Unexpected Exercise Advice for the Super Busy: Ditch the Rigid Routine

        Rohit Deshpande
        Rohit Deshpande
        Sebastian S. Kresge Professor of Marketing
        Contact
        Send an email
        → More Articles
        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
        • Consumer Behavior
        • Human Resources
        • Wages

        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