Companies increase pay inequality between top managers and employees even though it harms customer satisfaction. Moreover, lawmakers have introduced mandatory disclosure of pay inequality because it slows economic growth and threatens social cohesion. Yet, despite this duty to disclose pay inequality and the resulting potential threat to corporate reputation when excessive pay disparities occur, companies continue to increase them further. The question arises: do companies have effective strategies to reduce or even eradicate any unfavorable effects of pay inequality?

In two studies, researchers examine the extent to which corporate philanthropy can be used as a strategy to reduce any unfavorable effects of wage inequality.

A key finding is that by using corporate philanthropy, companies can mitigate the unfavorable effects of pay inequality on employees' customer orientation and thus on customer satisfaction and an increased reputational risk.

Read more here: Research Insight 75