Accounting for the Gap: A Firm Study Manipulating Organizational Accountability and Transparency in Pay Decisions

Abstract

Great progress has been made in documenting how employer practices may shape workplace inequality. Less research attention, however, has been given to investigating which organizational strategies are effective at addressing gender and racial inequality in labor markets. Using a unique field study design, this article identifies and tests, for the first time, whether accountability and transparency in pay decisions-two popular organizational initiatives discussed among scholars and practitioners-may reduce the pay gap by employee gender, race, and foreign nationality. Through a longitudinal analysis of a large private company, I study the performance-based reward decisions concerning almost 9,000 employees before and after high-level management adopted a set of organizational procedures, introducing accountability and transparency into the company's performance-reward system. Before such procedures were introduced, there was an observed gap in the distribution of performance-based rewards where women, ethnic minorities, and non-U.S.-born employees received lower monetary rewards compared with U.S.-born white men having the same performance evaluation scores and working in the same job and work unit with the same manager and the same human capital characteristics. Analyses of the company's employee performance-reward data after the adoption of accountability and transparency procedures show a reduction in this pay gap. I conclude by discussing the implications of this study for future research about employer strategies targeting workplace inequality and diversity.

References

1. Acker J (1990) Hierarchies, jobs, bodies: A theory of gendered organizations. Gender Soc. 4:139-158.
2. Anderson MJ (2011a) Firms must employ transparency to eliminate hidden bias against female leaders. Glass Hammer (April 27) http://www.theglasshammer.com/news/2011/04/27/firms-must -employ-transparency-to-eliminate-hidden-bias-against-female-leaders/.
3. Anderson MJ (2011b) 6 ways transparency can boost women in leadership in the financial services. Glass Hammer (March 31) http://www.theglasshammer.com/news/2011/03/31/6-ways-transparency -can-boost-women-in-leadership-in-the-financial-services/.
4. Arthur W Jr, Doverspike D (2005) Achieving diversity and reducing discrimination in the workplace through human resource management practices: Implications of research and theory for staffing, training, and rewarding performance. Dipboye RL, Colella A, eds. Discrimination at Work: The Psychological and Organizational Bases (Lawrence Erlbaum Associates, Mahwah, NJ), 305-328.
5. Bailyn L (2010) Putting gender on the table. Kaiser D, ed. Becoming MIT: Moments of Decision (MIT Press, Cambridge, MA), 65-85.
6. Bamberger P, Belogolovsky E (2010) The impact of pay secrecy on individual task performance. Personnel Psych. 965-996.
7. Bandiera O, Barankay I, Rasul I (2007) Incentives for managers and inequality among workers: Evidence from a firm-level experiment. Quart. J. Econom. 122:729-773.
8. Baron JN (1984) Organizational perspectives on stratification. Annual Rev. Sociol. 10:37-69.
9. Baron JN, Bielby WT (1980) Bringing the firms back in: Stratification, segmentation, and the organization of work. Amer. Sociol. Rev. 45:737-765.
10. Barsh J, Yee L (2013) Unlocking the full potential of women in the U.S. economy. Report, McKinsey & Company, Washington, DC. http://www.mckinsey.com/Client_Service/Organization/Latest _thinking/Unlocking_the_full_potential.aspx.
11. Bartol KM, Martin DC (1989) Effects of dependence, dependency threats, and pay secrecy on managerial pay allocations. J. Appl. Psych. 74:105-13.
12. Beckman CM, Phillips DJ (2005) Interorganizational determinants of promotion: Client leadership and the attainment of women attorneys. Amer. Sociol. Rev. 70:678-701.
13. Bellemare C, Shearer B (2009) Gift giving and worker productivity: Evidence from a firm-level experiment. Games Econom. Behav. 67:233-244.
14. Bergsteiner H (2012) Accountability Theory Meets Accountability Practice (Emerald Group Publishing, Bingley, UK).
15. Bernstein ES (2012) The transparency paradox: A role for privacy in organizational learning and operational control. Admin. Sci. Quart. 57:181-216.
16. Bielby WT, Baron JN (1986a) Men and women at work: Sex segregation and statistical discrimination. Amer. J. Sociol. 91:759-799.
17. Bielby WT, Baron JN (1986b) Undoing discrimination: Job integration and comparable worth. Bose C, Spitz G, eds. Ingredients for Women's Employment Policy (SUNY Press, Albany, NY), 211-229.
18. Biernat M, Kobrynowicz D (1997) Gender - and race-based standards of competence: Lower minimum standards but higher standards for devalued groups. J. Personality Soc. Psych. 72:544-557.
19. Bird SR (2011) Unsettling universities' incongruous, gendered bureaucratic structures: A case-study approach. Gender, Work, Occupations 18:202-230.
20. Brief AP, Butz RM, Deitch EA (2005) Organizations as reflections of their environments: The case of race composition. Dipboye RL, Colella A, eds. Discrimination at Work: The Psychological and Organizational Bases (Lawrence Erlbaum Associates, Mahwah, NJ), 119-148.
21. Bovens M (2007) Analyzing and assessing accountability: A conceptual framework. Eur. Law J. 13:447-468.
22. Cañas KA, Sondak H (2008) Opportunities and Challenges of Workplace Diversity: Theory, Cases, and Exercises (Pearson/Prentice Hall, Upper Saddle River, NJ).
23. Castilla EJ (2005) Social networks and employee performance in a call center. Amer. J. Sociol. 110:1243-1283.
24. Castilla EJ (2007) Dynamic Analysis in the Social Sciences (Academic Press, San Diego).
25. Castilla EJ (2008) Gender, race, and meritocracy in organizational careers. Amer. J. Sociol. 113:1479-1526.
26. Castilla EJ (2011) Bringing managers back in: Managerial influences on workplace inequality. Amer. Sociol. Rev. 76:667-694.
27. Castilla EJ, Benard S (2010) The paradox of meritocracy in organizations. Admin. Sci. Quart. 55:543-576.
28. Colella A, Paetzold RL, Zardkoohi A, Wesson MJ (2007) Exposing pay secrecy. Acad. Management Rev. 32:55-71.
29. Cook C, Watters M (1998) The impact of organizational form on gendered labor markets in engineering and law. Sociol. Rev. 46:314-339.
30. Cox DR (1972) Regression models and life-tables. J. Roy. Statist. Soc. Ser. B 34:187-220.
31. Cox DR (1975) Partial likelihood. Biometrika 62:269-276.
32. Crosby F (1982) Relative Deprivation and Working Women (Oxford University Press, New York).
33. Crosby F (1984) Relative deprivation in organizational settings. Res. Organ. Behav. 6:51-93.
34. Crosby F, Clayton S, Alksnis O, Hemker K (1986) Cognitive biases in the perception of discrimination: The importance of format. Sex Roles 14:637-646.
35. Dencker JC (2008) Corporate restructuring and sex differences in promotion. Amer. Sociol. Rev. 73:455-476.
36. DiNardo J (2008) Natural experiments and quasi-natural experiments. Durlauf SN, Blume LE, eds. The New Palgrave Dictionary of Economics Online, 2nd ed. (Palgrave Macmillan, Basingstoke, UK). Accessed January 1, 2015, http://dx.doi.org/10.1057/9780230226203.1162.
37. Dobbin F (2009) Inventing Equal Opportunity (Princeton University Press, Princeton, NJ).
38. Dobbin F, Kelly E (2007) How to stop harassment: The professional construction of legal compliance in organizations. Amer. J. Sociol. 112:1203-1243.
39. Dobbin F, Sutton JR, Meyer JW, Scott WR (1993) Equal opportunity law and the construction of internal labor markets. Amer. J. Sociol. 99:396-427.
40. Edelman LB (1990) Legal environments and organizational governance: The expansion of due process in the American workplace. Amer. J. Sociol. 95:1401-1440.
41. Edelman LB, Petterson SM (1999) Symbols and substance in organizations' response to civil rights law. Res. Soc. Stratification Mobility 17:107-135.
42. Elvira MM, Graham ME (2002) Not just a formality: Pay system formalization and sex-related earnings effects. Organ. Sci. 13:601-617.
43. Elvira M, Saporta I (2001) How does collective bargaining affect the gender pay gap? Work Occupations 28:469-490.
44. Ely RJ, Thomas DA (2001) Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes. Admin. Sci. Quart. 46:229-273.
45. Esen E (2005) 2005 workplace diversity practices. Survey report, Society for Human Resource Management, Alexandria, VA.
46. Fernandez RM (2001) Skill-biased technological change and wage inequality: Evidence from a plant retooling. Amer. J. Sociol. 107:273-320.
47. Fernandez RM, Mors ML (2008) Competing for jobs: Labor queues and gender sorting in the hiring process. Soc. Sci. Res. 37:1061-1080.
48. Ferraz C, Finan F (2008) Exposing corrupt politicians: The effects of Brazil's publicly released audits on electoral outcomes. Quart. J. Econom. 123:703-745.
49. Flynn G (1996) Firm's diversity efforts even the playing field. Personnel J. 75:56.
50. Foddy M, Smithson M (1999) Can gender inequalities be eliminated? Soc. Psych. Quart. 62:307-324.
51. Foschi M (1989) Status characteristics, standards, and attributions. Berger J, Zelditch M, Anderson B, eds. Sociological Theories in Progress: New Formulations (Sage, Newbury Park, CA), 58-72.
52. Foschi M (1992) Gender and double standards for competence. Ridgeway CL, ed. Gender Interaction and Inequality (Springer-Verlag, New York), 181-207.
53. Foschi M, Foddy M (1988) Standards, performances, and the formation of self-other expectations. Webster M Jr, Foschi M, eds. Status Generalization: New Theory and Research (Stanford University Press, Stanford, CA), 248-260.
54. Grant RW, Keohane RO (2005) Accountability and abuses of power in world politics. Amer. Political Sci. Rev. 99:29-43.
55. Harrison GW, List JA (2004) Field experiments. J. Econom. Literature 42:1009-1055.
56. Hartmann H (2013) Pass the Paycheck Fairness Act. New York Times (March 31) http://www.nytimes.com/roomfordebate/2013/03/31/why-has-salary-parity-still-not-happened/pass-the-paycheck -fairness-act.
57. Hernandez TJ (2012) Racial Subordination in Latin America: The Role of the State, Customary Law, and the New Civil Rights Response (Cambridge University Press, New York).
58. Hernandez TJ (2013) Legally mandate wage transparency. New York Times (March 31) http://www.nytimes.com/roomfordebate/2013/03/31/why-has-salary-parity-still-not-happened/legally-mandate -wage-transparency.
59. Hollyer JR, Rosendorff BP, Vreeland JR (2014) Measuring transparency. Political Anal. 22:413-434.
60. Hopkins N, Bailyn L, Gibson L, Hammonds E (2002) Reports of the committees on the status of women faculty. Report, Massachusetts Institute of Technology, Cambridge, MA. http://web.mit.edu/faculty/reports/pdf/overview.pdf.
61. Indiviglio D (2011) The case for making wages public: Better pay, better workers. Atlantic (July 20) http://www.theatlantic.com/business/archive/2011/07/the-case-for-making-wages-public-better -pay-better-workers/242238/.
62. Jirjahn U, Stephan G (2004) Gender, piece rates and wages: Evidence from matched employer-employee data. Cambridge J. Econom. 28:683-704.
63. Jovanovic B (1979) Job matching and the theory of turnover. J. Political Econom. 87:972-990.
64. Kalev A (2009) Cracking the glass cages? Restructuring and ascriptive inequality at work. Amer. J. Sociol. 114:1591-1643.
65. Kalev A (2014) How you downsize is who you downsize: Biased formalization, accountability, and managerial diversity. Amer. Sociol. Rev. 79:109-135.
66. Kalev A, Dobbin F, Kelly E (2006) Best practices or best guesses? Assessing the efficacy of corporate affirmative action and diversity policies. Amer. Sociol. Rev. 71:589-617.
67. Kaufmann D, Bellver A (2005) Transparenting transparency: Initial empirics and policy applications. Working paper, World Bank, Washington, DC. http://dx.doi.org/10.2139/ssrn.808664.
68. Kelly EL, Moen P, Tranby E (2011) Changing workplaces to reduce work-family conflict: Schedule control in a white-collar organization. Amer. Sociol. Rev. 76:265-290.
69. Kidder LH, Bellettirie G, Cohn ES (1977) Secret ambitions and public performances. J. Experiment. Soc. Psych. 13:70-80.
70. Kolstad I, Wiig A (2009) Is transparency the key to reducing corruption in resource-rich countries? World Development 37:521-532.
71. Konrad AM (2006) Cases in Gender and Diversity in Organizations, Ivey Casebook Series (Sage, Thousand Oaks, CA).
72. Lawler EE III (1971) Pay and Organizational Effectiveness: A Psychological View (McGraw-Hill, New York).
73. Lawler EE III (1981) Pay and Development (Addison-Wesley, Reading, MA).
74. Lederman D, Loayza N, Soares RR (2005) Accountability and corruption: Political institutions matter. Econom. Politics 17:1-35.
75. Lerner JS, Tetlock PE (1999) Accounting for the effects of accountability. Psych. Bull. 125:255-275.
76. Leventhal GS (1976) The distribution of rewards and resources in groups and organizations. Berkowitz L, Waslster E, eds. Advances in Experimental Social Psychology (Academic Press, New York), 92-131.
77. Leventhal GS, Karuza J Jr, Fry WR (1980) Beyond fairness: A theory of allocation preferences. Mikula G, ed. Justice and Social Interaction: Experimental and Theoretical Contributions from Psychological Research (Springer-Verlag, New York), 167-218.
78. Leventhal GS, Michaels JW, Sanford C (1972) Inequity and interpersonal conflict: Reward allocation and secrecy about reward as methods of preventing conflict. J. Personality Soc. Psych. 23:88-102.
79. Levitt SD, List JA (2009) Field experiments in economics: The past, the present, and the future. Eur. Econom. Rev. 53:1-18.
80. Liang K-Y, Zeger SL (1986) Longitudinal data analysis using generalized linear models. Biometrika 73:13-22.
81. Lytle T (2014) Making pay public. HR Magazine 59(9):25-30.
82. Madden JF (2012) Performance-support bias and the gender pay gap among stockbrokers. Gender Soc. 26:488-518.
83. Major B, Adams JB (1983) Role of gender, interpersonal orientation, and self-presentation in distributive-justice behavior. J. Personality Soc. Psych. 45:598-608.
84. Major B, Gramzow RH, McCoy SK, Levin S, Schmader T, Sidanius J (2002) Perceiving personal discrimination: The role of group status and legitimizing ideology. J. Personality Soc. Psych. 82:269-282.
85. McCracken DM (2000) Winning the talent war for women: Sometimes it takes a revolution. Harvard Bus. Rev. 78(6):159-167.
86. Moen P, Kelly EL, Chermack K (2009) Learning from a natural experiment: Studying a corporate work-time policy initiative. Crouter AC, Booth A, eds. Work-Life Policies That Make a Real Difference for Individuals, Families, and Organizations (Urban Institute Press, Washington, DC), 97-131.
87. Moen P, Kelly E, Hill R (2011) Does enhancing work-time control and flexibility reduce turnover? A naturally occurring experiment. Soc. Problems 58:69-98.
88. Moskos CC, Butler JS (1996) All That We Can Be: Black Leadership and Racial Integration the Army Way (Basic Books, New York).
89. Mulgan R (2000) "Accountability": An ever expanding concept? Public Admin. 78:555-573.
90. Petersen T, Saporta I (2004) The opportunity structure for discrimination. Amer. J. Sociol. 109:852-902.
91. Pfeffer J (1981) Power in Organizations (Pitman, Marshfield, MA).
92. Phillips DJ (2005) Organization genealogies and the persistence of gender inequality: The case of Silicon Valley law firms. Admin. Sci. Quart. 50:440-472.
93. Price JL (1977) The Study of Turnover (Iowa State University Press, Ames).
94. Ramachandran G (2012) Pay transparency. Penn State Law Rev. 116:1043-1079.
95. Ramarajan L, McGinn KL, Kolb DM (2012) A coevolution in activities and beliefs: The outside-inside story of gender and work. HBS Organizational Behavior Unit Working Paper 13-051, Harvard Business School, Boston. http://dx.doi.org/10.2139/ssrn.2184439.
96. Reskin BF (1993) Sex segregation in the workplace. Annual Rev. Sociol. 19:241-270.
97. Reskin BF (2003) Including mechanisms in our models of ascriptive inequality: 2002 Presidential Address. Amer. Sociol. Rev. 68:1-21.
98. Reskin BF, McBrier DB (2000) Why not ascription? Organizations' employment of male and female managers. Amer. Sociol. Rev. 65:210-233.
99. Rissing BA, Castilla EJ (2014) House of green cards: Statistical or preference-based inequality in the employment of foreign nationals. Amer. Sociol. Rev. 79:1226-1255.
100. Shwed U, Kalev A (2014) Are referrals more productive or more likable? Social networks and the evaluation of merit. Amer. Behav. Scientist 58:288-308.
101. Stainback K, Tomaskovic-Devey D, Skaggs S (2010) Organizational approaches to inequality: Inertia, relative power, and environments. Annual Rev. Sociol. 36:225-247.
102. Stinchcombe AL (2001) When Formality Works: Authority and Abstraction in Law and Organizations (Chicago University Press, Chicago).
103. Sturm S (2001) Second-generation employment discrimination: A structural approach. Columbia Law Rev. 101:459-568.
104. Tetlock PE (1983a) Accountability and complexity of thought. J. Personality Soc. Psych. 45:74-83.
105. Tetlock PE (1983b) Accountability and the perseverance of first impressions. Soc. Psych. Quart. 46:285-292.
106. Tetlock PE (1985) Accountability: A social check on the fundamental attribution error. Soc. Psych. Quart. 48:227-236.
107. Tetlock PE (1992) The impact of accountability on judgment and choice: Toward a social contingency model. Zanna M, ed. Advances in Experimental Social Psychology, Vol. 25 (Academic Press, New York), 331-376.
108. Tetlock PE, Kim JI (1987) Accountability and judgment in a personality prediction task. J. Personality Soc. Psych. 52:700-709.
109. Tetlock PE, Mitchell G (2009) Implicit bias and accountability systems: What must organizations do to prevent discrimination? Res. Organ. Behav. 29:3-38.
110. Tetlock PE, Skitka L, Boettger R (1989) Social and cognitive strategies for coping with accountability: Conformity, complexity, and bolstering. J. Personality Soc. Psych. 57:632-640.
111. Thomas DA (2004) Diversity as strategy. Harvard Bus. Rev. 82(9):98-108.
112. Tomaskovic-Devey D (1993) Gender and Racial Inequality at Work: The Sources and Consequences of Job Segregation (ILR Press, Ithaca, NY).
113. Tuma NB (1976) Rewards, resources, and the rate of mobility: A nonstationary multivariate stochastic model. Amer. Sociol. Rev. 41:330-338.
114. Vance A (2008) Crisis hits tech sector with layoffs as sales slump. New York Times (November 14) http://www.nytimes.com/2008/11/15/technology/companies/15sun.html.
115. Wagner DG, Ford RS, Ford TW (1986) Can gender inequalities be reduced? Amer. Sociol. Rev. 51:47-61.
116. Weigold MF, Schlenker BR (1991) Accountability and risk taking. Personality Soc. Psych. Bull. 17:25-29.