Do Big Inequalities in Executive Pay Hurt Firm Performance?

IF 5.5 3区管理学 Q1 BUSINESS

Corporate Governance-An International Review Pub Date : 2025-02-27 DOI:10.1111/corg.12647

Richard Yiu-Ming Chung, Jed DeVaro, Scott Fung

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引用次数: 0

Abstract

Research Question/Issue

Do large, within-firm executive pay differences hurt firm performance? Prior literature shows mixed results concerning the sign of the relationship between executive pay disparity and firm performance. This study evaluates that literature, clarifies what tournament theory predicts about the relationship, identifies methodological pitfalls and how to address them, and guides future scholarship in this area of considerable importance to firms and policy makers.

Research Findings/Insights

We estimate the relationship using improved methodology and find evidence of an inverted-U-shaped relationship between the executive pay spread and firm performance. However, the peak of this inverted U occurs at such a high level of the executive pay spread that it is practically irrelevant in most firms. The inverted U is found using a market-based measure of firm performance, but not a returns-based measure (i.e., ROA).

Theoretical/Academic Implications

This study addresses the theoretical and empirical limitations of the prior literature, thereby providing more credible estimates of the relationship between pay disparity and firm performance. Tournament theory offers a unified framework that can explain an inverted-U-shaped relationship between the executive pay spread and firm performance.

Practitioner/Policy Implications

Our results should reduce public concerns that CEOs increase their own compensation to exorbitant levels, to the detriment of firm performance.

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高管薪酬的巨大不平等会损害公司业绩吗？

公司内部高管薪酬的巨大差异会损害公司业绩吗？先前的文献表明，关于高管薪酬差异与公司绩效之间关系的迹象，结果好坏参半。本研究评估了这些文献，阐明了竞赛理论对这种关系的预测，确定了方法上的缺陷以及如何解决这些缺陷，并指导了该领域未来的学术研究，这对企业和政策制定者来说相当重要。研究结果/见解我们使用改进的方法估计了这种关系，并发现了高管薪酬差距与公司绩效之间呈倒u型关系的证据。然而，这种倒U型的峰值出现在高管薪酬差距如此之高的水平上，以至于它在大多数公司实际上是无关紧要的。倒U是使用基于市场的公司绩效衡量指标发现的，而不是基于回报的衡量指标（即ROA）。理论/学术意义本研究解决了先前文献的理论和经验局限性，从而为薪酬差异与公司绩效之间的关系提供了更可信的估计。竞赛理论提供了一个统一的框架，可以解释高管薪酬差距与公司业绩之间的倒u型关系。从业者/政策启示我们的研究结果应该减少公众的担忧，即首席执行官将自己的薪酬提高到过高的水平，从而损害公司的业绩。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Corporate Governance-An International Review Multiple-

CiteScore

7.00

自引率

11.30%

发文量

期刊介绍： The mission of Corporate Governance: An International Review is to publish cutting-edge international business research on the phenomena of comparative corporate governance throughout the global economy. Our ultimate goal is a rigorous and relevant global theory of corporate governance. We define corporate governance broadly as the exercise of power over corporate entities so as to increase the value provided to the organization"s various stakeholders, as well as making those stakeholders accountable for acting responsibly with regard to the protection, generation, and distribution of wealth invested in the firm. Because of this broad conceptualization, a wide variety of academic disciplines can contribute to our understanding.