Management compliance attention, social performance and pay gap: Evidence from China

Summary

The research paper, "Management compliance attention, social performance and pay gap: Evidence from China" by Han, Jiang, and Sun, published in PLOS One in 2025, investigates the mechanisms through which the pay gap within companies can be mitigated. The authors aim to enhance intra-firm distributive justice and foster sustainable organizational development by examining the influence of management compliance attention and social performance on pay equity. Their methodology involves a comprehensive approach, operationalizing management compliance attention through textual analysis of annual reports' MD&A sections. Social performance is measured using the Chinese Huazheng ESG rating system. The study's findings reveal several significant relationships. Firstly, management compliance attention is negatively correlated with the pay gap (β = -0.010, p < 0.01). This suggests that when management focuses more on compliance, the disparity in pay tends to decrease. Secondly, social performance also exhibits a negative correlation with the pay gap (β = -0.035, p < 0.01), indicating that companies with better social performance tend to have smaller pay gaps. Most notably, social performance strengthens the negative effect of management compliance attention on the pay gap (β = -0.022, p < 0.05). This implies that the combined effect of high compliance attention and strong social performance is more effective in narrowing the pay gap than either factor alone. The study also identifies organizational resilience as a partial mediator, explaining how compliance attention improves firms' adaptability to external changes, thereby contributing to a reduced pay gap. Heterogeneity analysis further highlights that these positive effects (narrowing the pay gap) are more pronounced in state-owned shareholding companies, whereas, surprisingly, they may widen the pay gap in private shareholding companies. The implications of this research are substantial for both theoretical understanding and practical application. Theoretically, the study contributes to the literature on the economic consequences of corporate compliance and social performance, as well as the determinants of pay gaps, aligning with Behavioral Theory and Equity Theory. It also enriches the application scope of organizational resilience theory. From a practical standpoint, the findings provide clear recommendations for firms: strengthen corporate compliance systems, enhance social performance, boost organizational resilience, and establish transparent compensation frameworks to foster equitable and sustainable development.