Employee Online Reviews and Corporate Wage Theft

<div> Wage theft occurs when an employer withholds benefits, such as wages and breaks, to&nbsp;<span>which an employee is legally entitled. This practice is the largest theft crime in the&nbsp;</span><span>U.S. and remains pervasive despite public and private enforcement efforts. We examine&nbsp;</span><span>whether workplace transparency created by employee social media disclosures can curb&nbsp;</span><span>corporate wage theft. Specifically, we test whether employee reports of wage theft on&nbsp;</span><span>Glassdoor, a major employee review platform, lead firms to reduce future wage theft.&nbsp;</span><span>Using a sample of over 3.2 million employee reviews from 2008 to 2021, we find that&nbsp;</span><span>employee disclosures of wage theft concerns are followed by a significant decline in subsequent&nbsp;</span><span>wage theft at the firm level. This evidence is consistent with managers taking&nbsp;</span><span>corrective action when wage theft is exposed through anonymous employee reviews.&nbsp;</span><span>Further analyses show that the disciplining role of employees’ wage theft disclosures is&nbsp;</span><span>stronger when managers face weaker personal liability for wage theft, indicating that&nbsp;</span><span>employee disclosures can substitute for formal managerial disincentives. We also show&nbsp;</span><span>that the relationship between employees’ wage theft disclosures and future wage theft&nbsp;</span><span>varies systematically with the type of wage theft and with employee characteristics.&nbsp;</span><span>Overall, our evidence highlights employee online disclosures as an important monitoring&nbsp;</span><span>mechanism for deterring wage theft. Nonetheless, we caution that managerial opportunism&nbsp;</span><span>may shift rather than be completely eliminated, as we find that higher rates of&nbsp;</span><span>employee wage theft disclosure are associated with more financial misreporting.</span> </div>