Understanding East-West Cultural Differences on Perceived Compensation Fairness Among Executives: From a Neuroscience Perspective

Cognitive neuroscience research has found that individuals from different cultures have different neural responses and emotional perceptions. Differences in executives' perception of external pay gaps in different cultures can affect their work attitudes and behavior. In this study, we explore the direct relationship between executive compensation fairness and executive innovation motivation. We also investigate the moderating effects of Confucian culture and western culture between executive compensation fairness and executive innovation motivation. Data were collected from the Chinese listed firms from 2011 to 2019 and test the relationship using the fixed-effect panel regression models. The results demonstrate that executive compensation fairness positively influences the executive innovation motivation. This effect is more pronounced in Confucian culture regions, while Western culture weakens this effect. The findings of this study confirmed that executive compensation fairness, provide a cross-cultural comparison for compensation research, validate the findings of cultural neuroscience, and provide useful insights into the research of common prosperity. To improve the corporate compensation structure, it is necessary to consider the relative pay equity with firms in the same region and the influence of corporate culture.