In this work the impacts of top managers’ relative rewards on firm
performance are examined. What is suggested and empirically found is that greater
disparities in interrank values of salary streams may lower the performance of more
focused firms (such as single-product firms or related diversifiers). It is also
suggested and found that higher gaps in interrank values of salary streams may boost
the performance of less focused firms (unrelated diversifiers). In contrast, it is
proposed and found that expanded differentials in interrank values of stock options
may improve performance, regardless of the strategic profile of the enterprise.
Moreover, it is contended and found that intrarank disparities in salary streams or
options may adversely influence the performance of the more focused as well as the
less focused firms.
Aiken, L. S.
and
West, S. G.
(1991) Multiple Regression: Testing and Interpreting
Interactions.
Newbury Park, CA.: Sage
.
2.
Baysinger, B.
and
Hoskisson, R. E.
(1989)
‘Diversification Strategy and R & D Intensity in
Multiproduct Firms’
, Academy of Management Journal32:
310-332
.
3.
Becker, B. E.
and
Huselid, M. A.
(1992)
‘The Incentive Effects of Tournament Compensation Systems’
, Administrative Science Quarterly37:
336-350
.
4.
Belsley, D. A.
,
Kuh, E.
and
Welsch, R. E.
(1980) Regression Diagnostics: Identifying Influential Data
and Sources of Collinearity.
New York: Wiley
.
5.
Bethel, J. E.
and
Liebeskind, J.
(1993)
‘The Effects of Ownership Structure on Corporate Restructuring’
, Strategic Management Journal14:
15-31
.
6.
Black, F.
and
Scholes, M.
(1973)
‘The Pricing of Options and Corporate Liabilities’
, Journal of Political Economy81:
637-654
.
7.
Chung, K. H.
and
Pruitt, S. W.
(1994)
‘A Simple Approximation of Tobin’s q’
, Financial Management23(3):
70-74
.
8.
Conyon, M. J.
,
Peck, S. I.
and
Sadler, G. V.
(2001)
‘Corporate Tournaments and Executive Compensation: Evidence from
the UK’
, Strategic Management Journal22:
805-815
.
9.
Cowherd, D. M.
and
Levine, D. I.
(1992)
‘Product Quality and Pay Equity Between Lower-level Employees and
Top Management: An Investigation of Distributive Justice Theory’
, Administrative Science Quarterly37:
302-320
.
10.
Drago, R.
and
Garvey, G. T.
(1998)
‘Incentives for Helping on the Job: Theory and Evidence’
, Journal of Labor Economics16:
1-25
.
11.
Ehrenberg, R. G.
and
Bognanno, M. L.
(1990)
‘Do Tournaments have Incentive Effects?’
, Journal of Political Economy98:
1307-1324
.
12.
Eriksson, T.
(1999)
‘Executive Compensation and Tournament Theory: Empirical Tests on
Danish Data’
, Journal of Labor Economics17:
262-280
.
13.
Finkelstein, S.
and
Boyd, B. K.
(1998)
‘How Much Does the CEO Matter: The Role of Managerial Discretion
in the Setting of CEO Compensation’
, Academy of Management Journal41:
179-199
.
14.
Freund, R. J.
and
Littell, R. C.
(1991) SAS System for Regression.
Carey, NC: SAS Institute
.
15.
Gibbons, R.
and
Murphy, K. J.
(1990)
‘Relative Performance Evaluation for Chief Executive Officers’
, Industrial and Labor Relations Review43:
30-51
.
16.
Gilley, O.
and
Leone, R.
(1991)
‘A Two-stage Imputation Procedure for Item Nonresponse in Surveys’
, Journal of Business Research22:
281-291
.
17.
Hambrick, D. C.
and
Finkelstein, S.
(1995)
‘The Effects of Ownership Structure on Conditions at the Top: The
Case of CEO Pay Raises’
, Strategic Management Journal16:
175-193
.
18.
Heckman, J.
(1979)
‘Sample Selection Bias as a Specification Error’
, Econometrika47:
153-161
.
19.
Henderson, A. D.
and
Fredrickson, J. W.
(2001)
‘CEO Pay Gap: A Competitive Test of Economic and Behavioral Views’
, Academy of Management Journal44:
96-117
.
20.
Holmstrom, B.
and
Milgrom, P.
(1991)
‘Multitask Principal - Agent Analyses: Incentive Contracts, Asset
Ownership, and Job Design’
, Journal of Law, Economics, and Organization7:
24-52
.
21.
Hoskisson, R. E.
,
Hitt, M. A.
,
Johnson, R. A.
and
Moesell, D. D.
(1993)
‘Construct Validity of an Objective (Entropy) Categorical Measure
of Diversification Strategy’
, Strategic Management Journal14:
215-235
.
22.
Jacquemin, A. P.
and
Berry, C. H.
(1979)
‘Entropy Measure of Diversification and Corporate Growth’
, Journal of Industrial Economics27:
359-369
.
23.
Jensen, M.
and
Murphy, K.
(1990)
‘Performance Pay and Top Management Incentives’
, Journal of Political Economy98:
225-264
.
24.
Kerr, J. L.
and
Kren, L.
(1992)
‘Effect of Relative Decision Monitoring on Chief Executive Compensation’
, Academy of Management Journal35:
370-397
.
25.
Kole, S.R.
(1997)
‘The Complexity of Compensation Contracts’
, Journal of Financial Economics43:
79-104
.
26.
Kroll, M.
,
Wright, P.
,
Toombs, L.
and
Leavell, H.
(1997)
‘Form of Control: A Critical Determinant of Acquisition
Performance and CEO Rewards’
, Strategic Management Journal18:
85-96
.
27.
Lazear, E. P.
(1995) Personnel Economics.
Cambridge, MA: MIT Press
.
28.
Lazear, E. P.
and
Rosen, S.
(1981)
‘Rank-order Tournaments as Optimum Labor Contracts’
, Journal of Political Economy89:
841-864
.
29.
Main, B. G.
,
O’Reilly, C. A.
and
Wade, J.
(1993)
‘Top Executive Pay: Tournament or Teamwork?’
, Journal of Labor Economics11:
606-628
.
30.
Miller, K. D.
and
Leiblein, M. J.
(1996)
‘Corporate Risk-return Relations: Returns Variability Versus
Downside Risk’
, Academy of Management Journal39:
91-122
.
31.
Murphy, K.
and
Zimmerman, J.
(1993)
‘Financial Performance Surrounding CEO Turnover’
, Journal of Accounting and Economics16:
273-315
.
32.
National Center for Employee Ownership
(1998) Current Practices in Stock Option Plan Design.
Oakland, CA: National Center for Employee Ownership
.
33.
National Center for Employee Ownership
(2001) Current Practices in Stock Option Plan Design.
Oakland, CA: National Center for Employee Ownership
.
34.
Prendergast, C.
(1999)
‘The Provision of Incentives in Firms’
, Journal of Economic Literature, 37:
7-63
.
35.
Postrel, S.
and
Rumelt, R. P.
(1992)
‘Precise of Incentives, Routines, and Self-command’
, Industrial and Corporate Change1:
397-425
.
36.
Ramakrishnan, R. T. S.
and
Thakor, A. V.
(1991)
‘Cooperation Versus Competition in Agency’
, The Journal of Law, Economics, and Organization7:
248-283
.
37.
Rosenbaum, J.
(1984) Career Mobility in Corporate Hierarchy.
New York: Academic Press
.
38.
Wright, P.
,
Ferris, S.
,
Sarin, A.
and
Awasthi, V.
(1996)
‘The Impact of Corporate Insider, Blockholder, and Institutional
Equity Ownership on Firm Risk-taking’
, Academy of Management Journal39:
441-463
.
39.
Wright, P.
,
Kroll, M.
and
Elenkov, E.
(2002)
‘Acquisition Returns, Increase in Firm Size and Chief Executive
Officer Compensation: The Moderating Role of Monitoring’
, Academy of Management Journal599-609
.
40.
Wright, P.
,
Kroll, M.
,
Lado, A.
and
Van Ness, B.
(2002)
‘The Structure of Ownership and Corporate Acquisition Strategies’
, Strategic Management Journal, 22:
41-53
.
41.
Zenger, T. R.
(1994)
‘Explaining Organizational Diseconomies of Scale in R&D:
Agency Problems and the Allocation of Engineering Talent, Ideas, and Effort
by Firm Size’
, Management Science40:
708-730
.
42.
Zenger, T. R.
and
Marshall, C. R.
(1995)
‘Group-based Pay Plans: An Empirical Test of the Relationships
Among Size, Incentive Intensity, and Performance’
, Academy of Management Journal38:
161-165
.
43.
Zenger, T. R.
and
Marshall, C. R.
(2000)
‘Determinants of Incentive Intensity in Group-based Rewards’
, Academy of Management Journal43:
149-163
.
