This research tests the proposition that changes in CEO pay will be reflected in strategic change—viewed as variation in firm strategy and deviation from industry strategic norms. Changes in total CEO pay, long-term pay, and long-term pay structure were found to affect strategic change in a sample of large U.S. firms. However, the effects of pay on change were positive when firm performance was low; the relationships were negative among the highest performing firms.
Get full access to this article
View all access options for this article.
References
1.
Allison, P.1990. Change scores as dependent variables in regression analysis. In C. Clogg (ed.), Sociological methodology: 93–114. Oxford: Basil Blackwell.
2.
Amburgey, T., & Miner, A.1992. Strategic momentum: The effects of repetitive, positional, and contextual momentum on merger activity. Strategic Management Journal, 13: 338–355.
3.
Barney, J.1991. Firm resources and sustained competitive advantage. Journal of Management, 17: 99–120.
4.
Baysinger, B., & Hoskisson, R.1990. The composition of boards of directors and strategic control: Effects on corporate strategy. Academy of Management Review, 15: 72–87.
5.
Bergh, D.1993. Watch time carefully: The use and misuse of time effects in management research. Journal of Management, 19: 683–705.
6.
Bergh, D., & Fairbank, J.1997. The analysis of change in organizational research: Assessment and demonstration of measurement and analytical alternatives. Penn State University Working Paper.
7.
Boeker, W.1997. Strategic change: The influence of managerial characteristics and organizational growth. Academy of Management Journal, 40: 152–171.
8.
Brown, S., & Eisenhardt, K.1998. Competing on the edge. Boston: Harvard Business Press.
9.
Chen, M., & MacMillan, I.1992. Nonresponse and delayed response to competitive moves: The roles of competitor dependence. Academy of Management Journal, 35: 539–570.
10.
Chen, M., & Miller, D.1994. Competitive attack, retaliation and performance. Strategic Management Journal, 15: 85–102.
11.
Eaton, J., & Rosen, H.1983. Agency, delayed compensation, and the structure of executive remuneration. Journal of Finance, 38: 1489–1505.
12.
Eisenhardt, K.1989. Agency theory: An assessment and review. Academy of Management Review, 14: 57–74.
Finkelstein, S., & Boyd, B.1998. How much doe the CEO matter? The role of managerial discretion in the setting of CEO compensation. Academy of Management Journal, 41: 179–199.
15.
Finkelstein, S., & Hambrick, D.1988. Chief executive compensation: A synthesis and reconciliation. Strategic Management Journal, 9: 543–558.
16.
Finkelstein, S., & Hambrick, D.1990. Top management team tenure and organizational outcomes: The moderating role of managerial discretion. Administrative Science Quarterly, 35: 484–503.
17.
Fredrickson, J., Hambrick, D., & Baumrin, S.1988. A model of CEO dismissal. Academy of Management Review, 13: 255–270.
18.
Fredrickson, J., & Iaquinto, A.1989. Inertia and creeping rationality in strategic decision making. Academy of Management Journal, 32: 516–542.
19.
Geletkanycz, M., & Hambrick, D.1997. The external ties of top executives: Implications for strategic choice and performance. Administrative Science Quarterly, 42: 654–681.
20.
Ghemawat, P.1991. Commitment. New York: Free Press.
21.
Gomez–Mejia, L., & Wiseman, R.1997. Reframing executive compensation: An assessment and outlook. Journal of Management, 23: 291–374.
22.
Granger, C., & Newbolt, P.1974. Spurious regressions in econometrics. Journal of Econometrics, 2: 111–120.
23.
Greene, H.1990. Econometric analysis. New York: Macmillan.
24.
Gupta, A., & Govindarajan, V.1993. Methodological issues in testing contingency theories. Y. Ijiri (Ed.), in Creative and innovative approaches to the science of management, 121–156.
25.
Harrison, J., & Mitchell, L.1995. Interaction effects in quasi-linear models. University of Texas at Dallas Working Paper.
26.
Henderson, A., & Fredrickson, J.1996. Information processing demands as a determinant of CEO compensation. Academy of Management Journal, 39: 575–606.
27.
Holmstrom, B.1982a. Managerial incentive problems: A dynamic perspective. Essays in Economics and Management in Honor of Lars Wahlbeck. Swedish School of Economics.
28.
Holmstrom, B., 1982b. Moral hazard in teams. Bell Journal of Economics, 13: 324–340.
29.
Holmstrom, B., & Ricart i Costa, J.1986. Managerial incentives and capital management. Quarterly Journal of Economics, November: 835–860.
30.
Hoskisson, R., Johnson, R., & Moesel, D.1994. Corporate divestiture intensity in restructuring firms: Effects of governance, strategy, and performance. Academy of Management Journal, 37: 1207–1251.
31.
Jaccard, J., Turrisi, R., & Wan, C.1990. Interaction effects in multiple regression. London: Sage.
32.
Jensen, M., & Murphy, K.1990. Performance and top management incentives. Journal of Political Economy, 98: 225–264.
33.
Kerr, S.1985. Diversification strategies and managerial rewards: An empirical study. Academy of Management Journal, 28: 155–179.
34.
Larcker, D.1983. The association between performance plan adoption and corporate capital investment. Journal of Accounting and Economics, 5: 3–30.
35.
Lublin, J.1999. Lowering the bar. Wall Street Journal, April, 8: D1-D1.
Porter, M.1996. What is strategy. Harvard Business Review, 74(6): 61–79.
43.
Prahalad, C., & Hamel, G.1990. The core competence of the corporation. Harvard Business Review, 68(3): 79–91.
44.
Rajagopalan, N., & Spreitzer, G.1997. Toward a theory of strategic change: A multi-lens perspective and integrative framework. Academy of Management Review, 22: 48–79.
45.
Sanders, W. (In press). Behavioral responses of CEOs to stock ownership and stock option pay. Academy of Management Journal.
46.
Sanders, W., & Carpenter, M.1998. Internationalization and firm governance: The roles of CEO compensation, top team composition, and board structure. Academy of Management Journal, 41: 158–178.
47.
SAS Institute. 1988. SAS/ETS users guide. NC: SAS Institute.
48.
Scharfstein, D., & Stein, J.1990. Herd behavior and investment. American Economic Review, 80: 465–479.
Siegel, S., & Castellan, N.1988. Nonparametric statistics for the behavioral sciences (2nd ed.). New York: McGraw–Hill.
51.
Spender, J.1989. Industry recipes: Nature and sources of managerial judgment. UK: Blackwell.
52.
Stata manual. College Station, Texas: Stata Press.
53.
Sull, D., 1999. Why good companies go bad. Harvard Business Review, 77(4): 42–51.
54.
Taussig, F., & Baker, W.1925. American corporations and their executives: A statistical inquiry. Quarterly Journal of Economics, 3: 1–51.
55.
Venkatramen, N.1988. The concept of fit in strategy research: Towards verbal and statistical correspondence. MIT, Sloan School of Management Working Paper.
56.
Wiersema, M., & Bantel, K.1992. Top management team demography and corporate strategic change. Academy of Management Journal, 35: 91–121.
57.
Wiersema, M., & Bantel, K.1993. Top management team turnover as an adaptation mechanism: The role of the environment. Strategic Management Journal, 14: 485–504.
58.
Wiseman, R., & Gomez–Mejia, L.1998. A behavioral agency model of managerial risk taking. Academy of Management Review, 23: 123–153.
59.
Zwiebel, J.1995a. Corporate conservatism and relative compensation. Journal of Political Economy, 103: 1–25.
60.
Zwiebel, J.1995b. Herd behaviors and managers’ decisions. Stanford Business School Magazine, 63: 6–7.
