The Effect of Pay Transparency on Narcissists: Can Personality Type Predict Reciprocity?

• In Event: Dark Triad in Accounting

Abstract

Government regulations and popular media push companies to be more transparent about employee wage information. Yet firms often attempt to keep this information secret because, when wage dispersion exists, transparency decreases total employee productivity. The fair-wage effort hypothesis (FWEH) models this phenomenon (Akerlof and Yellen 1990). Productivity decreases because, on average, when employees learn they are paid less than others, they engage in negative reciprocity, lowering their productivity. At the same time, on average, employees who learn they are paid more than others do not engage in positive reciprocity. I investigate whether narcissism predicts individual employees’ reciprocal responses after they learn they are being paid more or less than coworkers. Narcissists may feel more entitled to rewards and may be more likely to seek revenge for perceived injustices than nonnarcissists. I test the hypotheses using an experiment on Amazon Mechanical Turk in which I manipulate pay levels and transparency. I find that the FWEH accurately describes the average effect of transparency on employee behavior. However, narcissism, specifically narcissism’s behavioral factor of entitlement and exploitiveness, moderates the strength of individual employees’ reciprocal responses, increasing negative reciprocity and decreasing positive reciprocity.

Author

• Lisa LaViers, Tulane University