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 fixedeffect
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.