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Sharkey, Pontikes, & Hsu (2022). The Impact of Mandated Pay Gap Transparency on Firms’ Reputation as Employers

Author:

Amanda Sharkey – University of Chicago & Arizona State University

Elizabeth Pontikes – University of California–Davis

Greta Hsu – University of California–Davis

Interviewers:

Rosalie Luo – Western University

Jeesoo Kim – University of California, Irvine

Article link: https://doi.org/10.1177/00018392221124614


Thank you for offering your time to discuss your paper with us! We both found your study highly valuable in advancing our understanding of an extremely important topic (gender wage inequality) with respect to how employees themselves reacted. We learned a lot from your research design and abductive strategy to explain your results. We were also really impressed with how you leveraged various different theoretical perspectives to explain what you found empirically. Perhaps most importantly, we were both inspired by your collective commitment to study a phenomenon with such significant social implications while maintaining a high degree of analytical rigor. The intersection of rigor and relevance can often produce the most exciting scholarship and we think your study embodied that wholeheartedly.

  • Can you walk us through how the paper (both the study itself and your collaboration with one another) first came about? What triggered the motivation to study this particular question — was it more theoretically-driven, phenomenon-driven, or something else?

The three of us are from different cohorts within the same graduate program, although we were never all in school at once. But we knew one another to varying degrees as a result and had been working with a larger group on a book project. This paper started with us catching up one day, and the topic of the MeToo movement arose. This was not too long after the New York Times story about Harvey Weinstein had been published, and we all wondered what lasting impact it might have. So, naturally, we started thinking about how we could do an empirical project to answer that question. Ultimately, there were some data issues – the details of which we can no longer even remember! – that made us rethink that idea, although of course now papers are starting to come out on that topic. In any case, we were exploring that idea, and we stumbled across a newspaper article mentioning the U.K. law requiring pay gap transparency. We were intrigued by this and headed down the path of trying to understand this law’s impacts.

  • What did the evolution of the study look like? How did you iterate between the theory, data, and methods and what did that process look like?

This study evolved so much from start to finish! One fundamental question that we wrestled with was how to best measure the independent variable – the size of the wage gap. As our results show, the relationship between the wage gap and employees’ reactions is non-linear. But it took some experimentation with different specifications, as well as a lot of iteration with the literatures on procedural and distributive justice, to learn that. And even well into the review process, we were considering whether the wage gap relative to the industry average, or other specifications, might have different effects.

There was similar iteration around how to conceptualize our main outcome of interest – employee ratings on Glassdoor.com. When we were going through the review process, only a few papers had been published using Glassdoor data and so there wasn’t an established precedent around how to think about the ratings. In the end, the ratings can mean different things based on your vantage point. From an individual employee’s perspective, ratings encapsulate a person’s satisfaction with an organization. But when they are aggregated across many employees and made public, they take on a life of their own, such that they contribute to an employer’s reputation. We hope that our paper has effectively made this point.

  • What was the most challenging part of the process, either before you submitted the paper or during the publication process?

One overarching challenge we faced was trying to explain why we did not observe negative reputational consequences associated with disclosing a large gender wage gap, contrary to what we had expected based on existing theory. We came up with a variety of possible explanations and tested as many of these as we could, but we ultimately did not find a single smoking gun. This made it tricky to strike the right balance between asserting that we had learned something important from our analyses and yet also being clear that there were explanations for our findings that we could not test or could only test in limited ways. We received guidance from the Associate Editor handling our paper to take an abductive approach, which we were relatively unfamiliar with at the time. In some important ways, that alleviated this challenge by giving us the freedom to reason our way to the most plausible explanations for our findings. Of course, while the abductive approach helped in this way, it also created other challenges — namely figuring out how to organize and present our findings in a way that would logically make sense to readers.

  • We were particularly impressed with how you were able to develop insightful findings on the critically important topic of gender wage inequality. What do you recommend for students that strive to conduct research that is both rigorous and relevant (if this a useful way to think of developing scholarship)? Did you find it challenging?

While we hope our study is both rigorous and relevant, it also provides a good example of some of the challenges this kind of work entails. For example, we wanted to study the U.K. law in part because of its broad impact on different types of firms. Choosing to study this particular law meant we had to deal with the things that were both attractive and unattractive from a research design perspective based on how the law had been implemented. An alternative approach, which has also produced useful insights, is to choose a setting that is perhaps more narrow, but that offers other advantages. For example, there is very interesting work that focuses on pay transparency interventions targeting certain industries, such as universities. Those studies have other advantages relative to ours. Ultimately, there are going to be trade-offs in any research design, and it’s useful to keep that in mind when positioning your paper. 

Beyond the challenges of this kind of work, there are also some things that are easier. For example, there are tasks that are going to feel tedious in any project – times when you are rewriting something for what feels like the 100th time or manually cleaning the data or running another permutation of an analysis. It is easier to persevere in these tedious tasks when you are asking a question that you’re really curious about and where it is apparent how the answer matters.

  • Given the novelty and richness of your research setting, what would be your follow-up research questions that you’d like to pursue or want to see others pursue? Are there any other contexts or methodologies you’d like to see leveraged to expand on this research (either yourselves or others)?

As we mention in the paper, pay gap transparency has become quite popular as a public policy tool to address the gender wage gap. A very basic question involves looking at whether and how wages are affected by these types of interventions. This is a challenging question to address because it requires granular data on wages, as well as individual and organizational characteristics. Some scholars have addressed this question for specific sub-segments of the economy where this kind of data is available, or for settings where disclosure is mediated by an employee representative, but we have not seen a study that looks at this question economy-wide. We are hopeful that a study of this type will arise. And just as importantly, if such studies find an effect, it will be important to understand the mechanisms driving any impact. Finally, it would be useful to be able to observe some of the managerial sense-making that goes on as companies wrestle with disclosure. There is a lot of potential for qualitative researchers to tackle such questions, if a company would be willing to grant access.

  • Given that you’ve all published in ASQ before (Kovacs & Sharkey, 2014; Hsu 2006; Hsu & Grodal, 2021; Pontikes, 2012; Pontikes & Barnett, 2017), how does this recent study contrast with your previous ASQ publications generally, both in terms of the study itself and your experiences developing the paper? How do you see this paper fit in relation to your other work and broader research interests?

Amanda: This is similar to my 2014 ASQ paper with Balazs Kovacs, in that it centered around an unexpected finding that we tried to explain. Topically, it fits in with my prior work on ratings and reputational pressures.

Greta: In my 2021 paper with Stine Grodal, we faced a similar challenge in terms of figuring out how to organize and present a complex set of findings – in that case, changing perceptions of the e-cigarette category across 9 different stakeholder groups over a decade.  Both papers took a lot of brainstorming sessions and iterations to settle on an approach.  And both benefited greatly from the developmental guidance that the ASQ review teams provided along the way.

Elizabeth: In my 2017 paper with Bill Barnett, we also faced a similar challenge with how to present a series of related findings using three dependent variables that together showed the value of non-consensus behavior for firms and VCs. We also received valuable guidance from our editor who shepherded the process of bringing it together into a cohesive story.

Interviewer bios:

Rosalie Luo is a third-year Ph.D. candidate in Sustainability at Ivey Business School. Her research interests lie at the intersection of organizational theory, social and environmental issues, and collective action. She mainly uses in-depth qualitative methods like ethnography to collect in situ data to compare how different organizations strategically engage in sustainability and environmental justice. Prior to this work on environmental justice, she conducted an almost year-long ethnography of one of the oldest regenerative community-supported agriculture (CSA) farms in the United States. Her other work has focused on sustainable wine producers, as well as organizational mechanisms that reproduce social inequality.

Jeesoo Kim is a doctoral student in Strategy at the UCI Paul Merage School of Business. Her research lies at the intersection of cognitive and social psychology and transaction cost economics. Her work mainly examines how psychological factors affect interfirm relationships. She also conducts research on managerial cognition, capability development, and learning. Jeesoo serves as an ad-hoc reviewer for the Journal of Organization Design and Long Range Planning.  She holds a bachelor’s degree in economics and business administration (double major) and a master’s degree in management from Korea University.

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