Public welfare donation, rent sharing, and income gap within enterprises

• Published in: PloS one Vol. 19; no. 9; p. e0309387
• Main Authors: Chen, Jiantao, Luo, Xiang, Wang, Xiao
• Format: Journal Article
• Language: English
• Published: United States Public Library of Science 05-09-2024; Public Library of Science (PLoS)
• Subjects: Analysis; Bargaining; Boards of directors; Charitable contributions; Compensation; Compensation and benefits; Corporate governance; Corporate income taxes; Donations; Employee benefits; Employees; Executives; Government business enterprises; Heterogeneity; Humans; Impact analysis; Income; Income distribution; Income Tax; Income taxes; People and Places; Per capita; Public Assistance - economics; Rents (Property); Salaries and Fringe Benefits - statistics & numerical data; Science Policy; Social responsibility; Social Sciences; Social Welfare - economics; Tax deductions; Tax law; Taxes - economics; Variables; Wages; Wages & salaries; Widening; Working capital; China
• ISSN: 1932-6203; 1932-6203
• DOI: 10.1371/journal.pone.0309387

This study utilizes data from A-share listed companies between 2011 and 2020 to empirically investigate the impact and mechanism of public welfare donations on the internal income gap of enterprises. The research findings indicate that public welfare donations significantly increase the per capita salary of management, while their impact on the per capita salary of ordinary employees is not significant, thus leading to an expansion of the internal income gap within enterprises. The results from mechanism testing reveal that the income tax benefits resulting from charitable donations and the rise in corporate operating income have contributed to an increase in excess rent shared by enterprises and employees. Due to a stronger bargaining power, management shares more excess rents, thereby widening the income gap within the enterprise. Heterogeneity analysis demonstrates that public welfare donations have a greater impact on the internal income gap of non-state-owned enterprises; however, limiting executive compensation and enhancing employees' bargaining power can mitigate this widening effect caused by public welfare donations on enterprise's internal income gap. The research value of this study is threefold. Firstly, there is a scarcity of studies on the impact of public welfare donations on the income gap within enterprises, and this study contributes to enriching the research in this area. Secondly, this paper examines the effect of tax incentives for public welfare donations on the internal income gap of enterprises, thereby deepening the research on the impact of tax reduction and fee reduction, as well as expanding our understanding of corporate income tax preferential policies. Thirdly, it offers insights into improving enterprise compensation systems and enhancing corporate governance. Senior executives can potentially allocate more excess rent through their strong bargaining power. If their compensation remains unrestricted, it may lead to a widening internal income gap and negatively affect company operational efficiency.