The Symbiotic Bond of Income Equality and Organizational Equilibrium

Abstract

The corporate sustainability literature postulates that companies are social entities that constantly interact with the society in which they are located. Although this idea is generally accepted, one persistent research gap in this field relates to testing this connection through quantitative empirical studies. In this study, we shed light on the bidirectional relationship between income inequality and organizational equilibrium (i.e., balance in the employment relationship). From data on 2525 companies covering a nine-year period and using longitudinal structural equation modeling, findings demonstrate that equity in the distribution of resources among people in a society positively influences equity in the distribution of resources between employer and employees, and vice versa. A symbiotic union of mutual benefit between society and business is, therefore, developed over time. Theoretical and practical implications of our findings are presented.