Archive for June, 2015

Consumers and Pay Ratios

Disclosure of Ceo pay Ratios, (over the median total compensation in the company, ) may have –when implemented in the USA as a result of the Dodd-Frank Wall Street Reform Act- a very relevant effect on the companies` reputation. In particular “wage fairness” perception by consumers could lead to a change in their consumption choices.

Other countries might follow this legislation, as there is a widespread growing concern with inequalities and good governance practices.

Whether consumers actually have a fairness or egalitarian preference, or if their preferences are affected by the disclosure`s multiplier effect through the media, the fact is that companies should evaluate this possible effect.

This is the message that Bhavya Mohan, Michael I. Norton and Rohit Deshpandé communicate in their recent working paper for Harvard Business School, (1).

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