Parenthood and CEO Responses to Media Criticism on Pay

Abstract

Research on media coverage of controversial corporate practices typically suggests firms respond instrumentally to mitigate stakeholder reactions. However, we argue that CEOs' moral concerns can sometimes override strategic considerations, because media criticism may expose them to scrutiny from personally valued audiences – for instance, their own children. As moral role models, parent CEOs may become more willing to accept lower compensation to avoid negative scrutiny. To test our theory, we study media reports on CEO overcompensation. We hypothesize that media criticism of pay arrangements increases parent CEOs' willingness to accept lower pay relative to peers when their parental identity is salient. We test this hypothesis in two studies. The first, an observational study using a hand‐collected biographic dataset, provides suggestive evidence consistent with our hypothesis: when parenthood is a salient identity, media criticism is marginally associated with lower subsequent CEO pay relative to peers. The second, an experimental survey of executives and directors, offers suggestive evidence that activating respondents' parental identity marginally increases their willingness to forgo compensation and to support a less generous remuneration package.