How Does Corporate Governance Lead to Rawlsian Fairness? An Analysis of Within-firm Wage Inequality in Owner-managed Firms

Thure Kumar Bodendieck

Student thesis: Master thesis

Abstract

The purpose of this thesis is to examine the globally emerging phenomenon of income inequality. It investigates how wages that are fair in a Rawlsian sense can emerge from owner-managed firms as a specific form of corporate governance. The theory chapter provides a relevant introduction into the matter, a selection of concepts, and the deduction of the initial hypothesis regarding whether wages within owner-managed wages are paid more equally. Applying the paradigm of critical realism and using philosophical concepts, the theory chapter attempts to understand the implications of the findings of the following analysis. A total of 16,006 observations from a recent data set from Danish register data ensure the high reliability of the study, while the selection of proven methods for executing the quantitative analysis is based on variables from other studies related to wage inequality on the firm level, which is meant to increase validity. The tailoring of the data set and the key variables of within-firm wage inequality has been proven in previous works. Subsequently, the statistical analysis is introduced with descriptive statistics, followed by a bivariate Pearson correlation, illustrated variables on a map of Denmark, and three multiple linear regression analyses. This finally leads to the acceptance of the hypothesis that owner-managed firms pay more equal wages. This also serves as the basis for the discussion of the findings in the light of Rawlsian fairness and reciprocity. From here, the thesis comes to the conclusion that corporate governance does lead to more equally distributed wages within the firm, and thus Rawlsian fairness. The findings imply a need for further research on the relationship between corporate governance and wage inequality, a call for fostering the desired forms of corporate governance, and the consideration of a human nature that goes beyond the one of homo economicus.

EducationsMsc in Business Administration and Philosophy, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages83