Mandatory CSR Disclosure and Pay Gap: Evidence from China

ABSTRACT

This paper investigates whether mandatory corporate social responsibility (CSR) disclosures impact pay gaps between executives and rank-and-file employees in China. The study shows that CSR disclosure requirements attenuate the pay gap. This impact is more significant among companies with higher information asymmetry, with stronger employee bargaining power, and located in provinces with better legal environments. Finally, we show that a lower pay gap encourages economic growth by improving innovation and productivity.

KEYWORDS:

• Mandatory CSR disclosure
• pay gap

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. On January 4, 2008, the Guideline on the Fulfillment of Social Responsibility by SOEs was issued. On September 30, 2011, the Fulfillment Outline of the Harmony Growth Strategy for SOEs during the Twelfth Five-Year Plan Period was released. The opinions noted that the connotation of the harmonious development strategy was to take as the core sustainable development; to encourage corporates to perform their social obligations as carriers; to recognize, deploy and promote the harmonious development of central enterprises, society and environment based on the strategy; and to provide support to realize the goal of “strengthening, optimizing and world-class”. On March 13, 2012, Guidance on Management Improvement Activities of SOEs was issued. The guidance identified 13 management areas as the focus of special management improvement, of which social responsibility management was one. In 2015, the No. 1 Document of the Chinese Communist Party Central Committee stated that efforts should be made to maintain the momentum of bridging the urban–rural revenue divergence under the new normal of economic development. On July 1, 2016, Guidance on the Better Performance of Social Responsibilities by SOEs was issued. The overall goal of promoting SOEs to fulfill their social responsibilities proposed in the opinions is that, by 2020, SOEs will form a more mature and standardized social responsibility management system and a group of excellent enterprises that lead the industry to fulfill their social responsibilities, have international influence and are respected.

2. The ST designation refers to a listed company with financial or other abnormalities.

3. CPI refers to the consumer price index and eliminates the impact of inflation

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71802160].