The Impact of Mandated Pay Gap Transparency on Firms’ Reputations as Employers

Abstract

Mandated gender wage gap disclosure laws are an increasingly popular but relatively untested solution to gender-based compensation inequalities. Scholars and policymakers alike have argued that disclosure will lead to greater social accountability—either reputational harm for firms revealing large disparities or benefit for more-egalitarian organizations. Yet little research has directly tested this central assumption. We advance understanding of this issue by examining reactions from a key constituency affected by pay gaps: employees. We analyze the existence, magnitude, and persistence of changes in employees’ public affective evaluations of their employers on the review site Glassdoor in the wake of pay gap disclosures prompted by new regulations in the United Kingdom. We find a short-lived improvement in employees’ evaluations of organizations reporting pay parity, consistent with a reputational boost. At the same time, we find little evidence of a negative post-disclosure reaction from employees of firms reporting sizable gender-based disparities. We take an abductive approach to investigate these surprising findings, probing key assumptions and the viability of different plausible explanations for the results. We consider how our empirical findings can inform the development of novel theory in the areas of gender wage inequality, reputation, and transparency.