Salary Dispersion for Lower Stratum Employees as a Predictor of Oligarchic Salary Practices

Abstract

Company salary practices vary in terms of the average rate differential between upper- and lower stratum employees. Those companies with high interstrata rate multiples—typically run by a small, oligarchic leadership—are likely to evoke perceptions of vertical inequities among employees paid below the top echelon. This is especially a concern for small companies where all employees may work in close proximity. To mitigate the risk of dysfunctional behavior (e.g., turnover) stemming from interstrata rate disparities, companies with more oligarchic practices are predicted to engender greater salary dispersion within the lower stratum of employees, relative to those with more egalitarian practices, to “camouflage” the phenomenon. This article presents the results of an archival study that lends support for this prediction.