Cheating for the Cause: The Effects of Performance-Based Pay on Socially Oriented Misreporting
Hobson, Jessen L., Sommerfeldt, Ryan D., Wang, Laura W.
The Accounting Review · 2021 · Volume 96 · Issue 5
Abstract
We examine the effect of performance-based pay on misreporting intended to benefit a social mission. We show that performance-based pay decreases people's propensity to misreport for a social mission in a not-for-profit setting (Experiment 1). We similarly show that in a for-profit setting, performance-based pay also decreases misreporting propensity for a social mission, although not for a non-social mission (Experiment 2). Finally, using a framed field experiment with participants attending a conference hosted by a real charity, we show that performance-based pay reduces actual misreporting when misreporting leads to more donations for the charity (Experiment 3). These results are consistent with our theory suggesting that, relative to fixed pay, performance-based pay imposes additional costs on misreporting employees' self-concepts of benevolence and honesty. JEL Classifications:C93; J33; L31; M4; M52.
Keywords
social-mission organizations, not-for-profit organizations, performance-based pay, misreporting, socially oriented misreporting, framed field experiment
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