Focusing on developed countries, I present a model explaining how firms help determine rates of income inequality at the societal level. I propose that the manner in which firms reward individuals ...for their labor, how they match individuals to jobs, and where they place their boundaries contribute to levels of income inequality in a society. I argue that the determinant of these three processes is due, in part, to the effect of systems of corporate governance on the power and influence of different organizational stakeholders, resulting in variance in the types of employment relationships that predominate in a society. I conclude with a discussion of the research implications of emphasizing employers and employment practices as key determinants of societal-level income inequality.
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Microfinance is a promising tool for addressing the grand challenge of global poverty. Yet, while many studies have examined how microfinance loans affect poor borrowers, we know little about how ...microfinance organizations (MFOs) themselves finance their lending activities. This is a significant oversight because most MFOs do not self-fund their lending, but, rather, rely on loans from external funders. To better understand microfinance funding, we apply and extend the institutional logics perspective to analyze the lending practices of commercial and public funders, who together provide most of the capital for global microfinance. We argue that these funders adhere to financial and development logics, respectively, and that this leads them to invest in different types of MFOs. Yet, in the face of uncertainty, we suggest that the practices motivated by these logics will start to converge in ways that are problematic for a nation's microfinance sector. Using a proprietary database of all traceable loans to MFOs from 2004 to 2012, we find strong support for our hypotheses. In particular, our findings show that the relationship between institutional logics and organizational practices is contextually contingent, and this insight contributes important understanding about the efficacy of microfinance as a poverty-reduction tool.
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Wage inequality in the United States has risen dramatically over the past few decades, prompting scholars to develop a number of theoretical accounts for the upward trend. This study argues that ...large firms have been a prominent labor-market institution that mitigates inequality. By compensating their low- and middle-wage employees with a greater premium than their higher-wage counterparts, large U.S. firms reduced overall wage dispersion. Yet, broader changes to employment relations associated with the demise of internal labor markets and the emergence of alternative employment arrangements have undermined large firms’ role as an equalizing institution. Using data from the Current Population Survey and the Survey of Income and Program Participation, we find that in 1989, although all private-sector workers benefited from a firm-size wage premium, the premium was significantly higher for individuals at the lower end and middle of the wage distribution compared to those at the higher end. Between 1989 and 2014, the average firm-size wage premium declined markedly. The decline, however, was exclusive to those at the lower end and middle of the wage distribution, while there was no change for those at the higher end. As such, the uneven declines in the premium across the wage spectrum could account for about 20% of rising wage inequality during this period, suggesting that firms are of great importance to the study of rising inequality.
The online appendix is available at
https://doi.org/10.1287/orsc.2017.1125
.
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While prior work has shown that a firm's market performance affects the loyalty of its board, little is known about how corporate social responsibility affects directors' willingness to serve. In ...this project, we shed light on this question by exploring how social movement boycotts that challenge a firm's social responsibility affect board turnover. We find that boycotts provoke a significant increase in turnover at targeted firms, and that directors are especially likely to leave after boycotts that signal that the firm's social values conflict with their personal values. Specifically, we find that an ideological match between a board member and the activist challengers predicts exit: liberals are more likely to leave after liberal challenges and conservatives are more likely to leave after conservative challenges. Moreover, we show that turnover is consistent with the rigidity of the right hypothesis in political psychology: conservatives, as compared to liberals, are more prone to entrenchment when their firms face challenges from the opposition. Our study offers strong evidence that corporate social performance matters to corporate directors, and provides insights into the manner in which contentious crises affect the motivation of corporate insiders.
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Since the early 1980s, employment in the United States has undergone significant transformation as the large corporations that once safeguarded employees with stable jobs and rewards for loyalty have ...replaced these employment relationships with ones based on cost containment and flexibility. One important consequence of these developments is that firms have abdicated their role as a critical risk bearer in society. Although evidence suggests that firms have increasingly shifted market risks onto their workforce, to date, there have been few detailed analyses exploring what factors have driven this phenomenon. This study adds to our understanding of why firms have transferred risk to their employees by examining the decline of a highly institutionalized practice wherein large U.S. firms used to bear retirement risk: the defined benefit (DB) pension plan. Through a detailed analysis, I show that variance in the presence, power, and interests of shareholders and employees at the firm level differentially affect a firm’s willingness to shift the risk of retirement onto its workers. Specifically, I demonstrate empirically that different types of shareholders have differential effects on a firm’s retirement practices, suggesting that the changing equity ownership structure of large U.S. firms has played a key role in how risk is allocated between workers and firms. Declines in employee power have also played a role because firm levels of unionization positively affect rates of DB participation for both unionized and nonunionized workers.
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Prior research suggests that individuals react negatively when they perceive they are underpaid. Moreover, individuals frequently select pay referents who share their race and gender, suggesting that ...demographic similarity affects one’s knowledge of pay differences. Leveraging these insights, the authors examine whether the gender and racial composition of a work unit shapes individuals’ reactions to pay deprivation. Using field data from a large health care organization, they find that pay deprivation resulting from workers receiving less pay than their same-sex and same-race coworkers prompts a significantly stronger response than does pay deprivation arising from workers receiving less pay than their demographically dissimilar colleagues. A supplemental experiment reveals that this relationship likely results from individuals’ propensity to select same-category others as pay referents, shaping workers’ information about their colleagues’ pay. The study’s findings underscore the need to theoretically and empirically account for how demographically driven social comparison processes affect reactions to pay inequality.
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Research Summary
The COVID‐19 pandemic will rank among the greatest challenges many executives will have faced and not only due to the operational challenges it posed. Upon entering the U.S. context, ...the disease was immediately politically polarized, with clear partisan splits forming in risk perceptions of the disease unrelated to science. We exploit this context to examine whether firms' partisan positioning affects whether and how they communicate risk to their investors on a polarized public policy issue. To do so, we examine the covariation between firms' disclosure of COVID‐19 risks and the partisanship of their political giving. Our analysis of earnings call and campaign contribution data for the S&P 500 reveals a positive association between a firm's contributions to Democrats and its disclosure of COVID‐19 risks.
Managerial Summary
From its onset in the United States, attitudes toward and discourse around the COVID‐19 pandemic was heavily politicized and perceptions of the disease's risks were seen as more serious by Democratic‐identifying individuals than Republican identifiers. In this study, we examine whether this pattern also holds for U.S. publicly traded firms, who can also stake out a political position through their corporate political action committee campaign contributions. In analyses of earnings call transcripts from the first quarter of 2020, we show that the more Republican‐leaning (Democrat‐leaning) a firm's campaign contributions are, the less (more) likely it was to voluntarily disclose risks related to COVID‐19. We argue that these findings hold implications for parties interested in interpreting firm's risk disclosures on politically polarized issues.
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Budd, Pohler, and Huang (Industrial Relations: A Journal of Economy and Society 2021) proposed a theory about how managers’ and employees’ (mis)matched frames of reference regarding employment ...relationships help explain HR outcomes observed in practice. In this response, I pose some questions about the scope of the theory, possible contingencies, and potential confounding mechanisms in hopes of motivating additional dialogue regarding the importance that frames of reference play in how employment relationships are enacted.
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Therapeutic activation of Toll-like receptors (TLR) has potential for cancer immunotherapy, for augmenting the activity of antitumor monoclonal antibodies (mAbs), and for improved vaccine adjuvants. ...A previous attempt to specifically target TLR agonists to dendritic cells (DC) using mAbs failed because conjugation led to nonspecific binding and mAbs lost specificity. We demonstrate here for the first time the successful conjugation of a small molecule TLR7 agonist to an antitumor mAb (the anti-hCD20 rituximab) without compromising antigen specificity. The TLR7 agonist UC-1V150 was conjugated to rituximab using two conjugation methods, and yield, molecular substitution ratio, retention of TLR7 activity, and specificity of antigen binding were compared. Both conjugation methods produced rituximab–UC-1V150 conjugates with UC-1V150: rituximab ratio ranging from 1:1 to 3:1 with drug loading quantified by UV spectroscopy and drug substitution ratio verified by MALDI TOF mass spectroscopy. The yield of purified conjugates varied with conjugation method and dropped as low as 31% using a method previously described for conjugating UC-1V150 to proteins, where a bifunctional cross-linker was first reacted with rituximab and second to the TLR7 agonist. We therefore developed a direct conjugation method by producing an amine-reactive UV active version of UC-1V150, termed NHS:UC-1V150. Direct conjugation with NHS:UC-1V150 was quick and simple and gave improved conjugate yields of 65–78%. Rituximab–UC-1V150 conjugates had the expected pro-inflammatory activity in vitro (EC50 28–53 nM) with a significantly increased activity over unconjugated UC-1V150 (EC50 547 nM). Antigen binding and specificity of the rituxuimab–UC-1V150 conjugates was retained, and after incubation with human peripheral blood leukocytes, all conjugates bound strongly only to CD20-expressing B cells while no nonspecific binding to CD20-negative cells was observed. Selective targeting of Toll-like receptor activation directly within tumors or to DC is now feasible.
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In an analysis of data on employment in the 48 contiguous United States from 1978 to 2008, we examine the connection between organizational demography and rising income inequality at the state level. ...Drawing on research on social comparisons and firm boundaries, we argue that large firms are susceptible to their employees making social comparisons about wages and that firms undertake strategies, such as wage compression, to help ameliorate their damaging effects. We argue that wage compression affects the distribution of wages throughout the broader labor market and that, consequently, state levels of income inequality will increase as fewer individuals in a state are employed by large firms. We hypothesize that the negative relationship between large-firm employment and income inequality will weaken when large employers are more racially diverse and their workers are dispersed across a greater number of establishments. Our results show that as the number of workers in a state employed by large firms declines, income inequality in that state increases. When these firms are more racially diverse, however, the negative relationship between large-firm employment and income inequality weakens. These results point to the importance of considering how corporate demography influences the dispersion of wages in a labor market.
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