Overpaid CEOs and Underpaid Managers: Fairness and Executive Compensation

Published Online:https://doi.org/10.1287/orsc.1060.0204

References

  • Adams J. S., Berkowitz L. Inequity in social exchange. Advances in Social Psychology (1965) Vol. 2(Academic Press, New York) 267–299CrossrefGoogle Scholar
  • Ahuja G. The duality of collaboration: Inducements and opportunities in the formation of interfirm linkages. Strategic Management J. (2000) 21:317–343CrossrefGoogle Scholar
  • Bartol K. M., Martin D. C. Influences on managerial pay allocations: A dependency perspective. Personnel Psych. (1988) 41:141–152CrossrefGoogle Scholar
  • Bartol K. M., Martin D. C. When politics pays: Factors influencing managerial compensation decisions. Personnel Psych. (1990) 43:599–614CrossrefGoogle Scholar
  • Bazerman M. H., Murninghan Keith. Fairness, social comparison, and irrationality. Social Psychology in Organizations: Advances in Theory and Research (1993) (Prentice-Hall, Englewood Cliffs, NJ) 184–203Google Scholar
  • Bazerman M. H., Loewenstein G. F., White S. B. Reversals of preference in allocation decisions: Judging an alternative versus choosing among alternatives. Admin. Sci. Quart. (1992) 37:220–240CrossrefGoogle Scholar
  • Bebchuk L. A., Fried J. M.Pay Without Performance: The Unfulfilled Promise of Executive Compensation (2004) (Harvard University Press, Cambridge, MA) Google Scholar
  • Belliveau M., O’Reilly C., Wade J. Social capital at the top: The effects of social similarity and status on CEO compensation. Acad. Management J. (1996) 39:1568–1593CrossrefGoogle Scholar
  • Bertrand M., Mullainathan S. Are CEOs rewarded for luck? The ones without principles are. Quart. J. Econom. (2001) 116:901–932CrossrefGoogle Scholar
  • Blau P.Exchange and Power in Social Life (1964) (Wiley, New York) Google Scholar
  • Bloom M. The performance effects of pay dispersion on individuals and organizations. Acad. Management J. (1999) 42:25–40CrossrefGoogle Scholar
  • Bloom M., Michel J. G. The relationships among organizational context, pay dispersion and managerial turnover. Acad. Management J. (2002) 45:33–42CrossrefGoogle Scholar
  • Bok D.The Cost of Talent (1993) (Free Press, New York) Google Scholar
  • Carpenter M. A., Sanders W. M. G. Top management team compensation: The missing link between CEO pay and firm performance? Strategic Management J. (2002) 23:367–375CrossrefGoogle Scholar
  • Carpenter M. A., Wade J. B. Micro-level opportunity structures as determinants of non-CEO executive pay. Acad. Management J. (2002) 45:1085–1103CrossrefGoogle Scholar
  • Cowherd D., Levine D. Product quality and pay equity between lower-level employees and top management: An investigation of distributive justice theory. Admin. Sci. Quart. (1992) 37:302–320CrossrefGoogle Scholar
  • Crosby F., Staw Barry, Cummings Larry. Relative deprivation in organizational settings. Research in Organizational Behavior (1984) Vol. 6(JAI Press, Greenwich, CT) 51–93Google Scholar
  • Crystal G. S.In Search of Excess: The Overcompensation of American Executives (1991) (Norton, New York) Google Scholar
  • Deutsch M.Distributive Justice: A Social Psychological Perspective (1985) (Yale University Press, New Haven, CT) Google Scholar
  • Diekmann K. A., Samuels S. M., Ross L., Bazerman M. H. Self-interest and fairness in problems of resource allocation: Allocators versus recipients. J. Personality Soc. Psych. (1997) 72:1061–1074CrossrefGoogle Scholar
  • Dittrich J., Carrell M. Organizational equity perceptions, employee job satisfaction, and departmental absence and turnover rates. Organ. Behav. Human Performance (1979) 24:29–40CrossrefGoogle Scholar
  • Easterlin R. A. Will raising the incomes of all increase the happiness of all? J. Econom. Behav. Organ. (1995) 27:35–48CrossrefGoogle Scholar
  • Fehr E., Gachter S. Fairness and retaliation: The economics of reciprocity. J. Econom. Perspectives (2000) 14(3):159–181CrossrefGoogle Scholar
  • Feldman N., Ruble D. Social comparison strategies: Dimensions offered and options taken. Personality Soc. Psych. Bull. (1981) 7:11–16CrossrefGoogle Scholar
  • Festinger L. A theory of social comparison processes. Human Relations (1954) 7:117–140Google Scholar
  • Finkel N. J. But it’s not fair! Commonsense notions of unfairness. Psych. Public Policy, Law (2000) 6:898–952CrossrefGoogle Scholar
  • Finkelstein S. Understanding pay dispersion within top management teams: A social comparison perspective. (1996) . Working paper, Amos Tuck School of Business, Dartmouth College, Hanover, NHGoogle Scholar
  • Finkelstein S., Hambrick D. Chief executive compensation: A study of the intersection of markets and political processes. Strategic Management J. (1989) 10:21–134CrossrefGoogle Scholar
  • Finkelstein S., Hambrick D.Strategic Leadership: Top Executives and Their Effects on Organizations (1996) (West Publishing, New York) Google Scholar
  • Fiske S., Taylor S.Social Cognition (1984) (Random House, New York) Google Scholar
  • Folger R., Martin C. Relative deprivation and referent cognitions—distributive and procedural effects. J. Experiment. Soc. Psych. (1986) 22(6):531–546CrossrefGoogle Scholar
  • Frank R. H., Cook P. J.The Winner Take All Society: How More and More Americans Compete for Every Fewer and Bigger Prizes, Encouraging Economic Waste, Income Inequality, and an Impoverished Cultural Life (1995) (Free Press, New York) Google Scholar
  • Gerhart B., Rynes S. L.Compensation (2003) (Sage, Thousand Oaks, CA) Google Scholar
  • Ghemawat P., Stander H. J. Nucor at a crossroads. (1992) . Harvard Business School Case 9-793-039, Harvard University, Cambridge, MAGoogle Scholar
  • Gibbons F., Benbow C., Gerrard M. From topdog to bottom half: Social comparison strategies in response to poor performance. J. Personality Soc. Psych. (1994) 67:638–652CrossrefGoogle Scholar
  • Goodman P. Effect of perceived inequity on salary allocation decisions. J. Appl. Psych. (1975) 60:372–375CrossrefGoogle Scholar
  • Greenberg J. Equity and workplace status: A field experiment. J. Appl. Psych. (1988) 73:606–613CrossrefGoogle Scholar
  • Greenberg J. Stealing in the name of justice: Informational and interpersonal moderators of theft reactions to underpayment inequity. Organ. Behav. Human Decision Processes (1993) 54:81–103CrossrefGoogle Scholar
  • Hambrick D., D’Aveni R. Top management team deterioration as a part of the downward spiral of large corporate bankruptcies. Management Sci. (1992) 38:1445–1466LinkGoogle Scholar
  • Harder J. Equity theory versus expectancy theory: The case of major league baseball free agents. J. Appl. Psych. (1991) 76:458–464CrossrefGoogle Scholar
  • Harder J. Play for pay: Effects of inequity in a pay-for-performance context. Admin. Sci. Quart. (1992) 37:321–335CrossrefGoogle Scholar
  • Hauenstein N. M., McGonigle T., Flinder S. W. A meta-analysis of the relationship between procedural justice and distributive justice: Implications for justice research. Employee Responsibilities Rights J. (2001) 39–56CrossrefGoogle Scholar
  • Hayward M. L. A., Hambrick D. C. Explaining the premiums paid in large acquisitions: Evidence of CEO hubris. Admin. Sci. Quart. (1997) 42:103–127CrossrefGoogle Scholar
  • Henderson R.Compensation Management: Rewarding Performance (1994) (Simon & Shuster, Englewood Cliffs, NJ) Google Scholar
  • Heneman R. L., Cohen D. J. Supervisory and employee characteristics as correlates of employee salary increases. Personnel Psych. (1988) 41:345–360CrossrefGoogle Scholar
  • Heneman H. G., Judge T. A., Rynes S. L., Gerhart B. Compensation attitudes. Compensation in Organizations (2000) (Jossey-Bass, San Francisco, CA) 61–103Google Scholar
  • Hicks J.The Theory of Wages (1963) (St. Martin’s Press, New York) CrossrefGoogle Scholar
  • Huber P. J. The behavior of maximum likelihood estimators under nonstandard conditions. Proc. 5th Berkeley Sympos. Math. Statist. Probab. (1967) Vol. 1(University of California Press, Berkeley, CA) 221–233Google Scholar
  • Hymowitz C. Does rank have too much privilege? Wall Street Journal (2002) February 26):B1Google Scholar
  • Kabanoff B. Equity, equality, power, and conflict. Acad. Management Rev. (1991) 16(5):416–441CrossrefGoogle Scholar
  • Kahneman D., Knetsch J., Thaler R. Fairness and the assumption of economics. J. Bus. (1986) 59:S285–S300CrossrefGoogle Scholar
  • Kaplan S., Henderson R. Inertia and incentives: Bridging organizational economics and organizational theory. Organ. Sci. (2005) 16(5):509–521LinkGoogle Scholar
  • Kruglanski A., Mayseless O. Classic and current social comparison research: Expanding the perspective. Psych. Bull. (1990) 108:195–208CrossrefGoogle Scholar
  • Kulik C., Ambrose M. Personal and situational determinants of referent choice. Acad. Management Rev. (1992) 17:212–237CrossrefGoogle Scholar
  • Lambert R., Larcker D., Weigelt K. The structure of organizational incentives. Admin. Sci. Quart. (1993) 38:438–461CrossrefGoogle Scholar
  • Lavelle L. Executive pay. Business Week (2001) April 16Google Scholar
  • Lazear E. Pay equality and industrial politics. J. Political Econom. (1989) 97:561–580CrossrefGoogle Scholar
  • Levine D. I. Cohesiveness, productivity, and wage dispersion. J. Econom. Behav. Organ. (1993a) 15:237–255CrossrefGoogle Scholar
  • Levine D. I. Fairness, markets, and ability to pay: Evidence from compensation executives. Amer. Econom. Rev. (1993b) 83:1241–1259Google Scholar
  • Main B., O’Reilly C., Wade J. Top executive pay: Tournament or teamwork? J. Labor Econom. (1993) 11:606–628CrossrefGoogle Scholar
  • Main B., O’Reilly C., Wade J. The CEO, the board of directors and executive compensation: Economic and psychological perspectives. Indust. Corporate Change (1995) 4:293–332CrossrefGoogle Scholar
  • Major B., Testa M. Social comparison processes and judgments of entitlement and satisfaction. J. Experiment. Soc. Psych. (1989) 25:101–120CrossrefGoogle Scholar
  • Meindl J. R. Managing to be fair: An exploration of values, motives, and leadership. Admin. Sci. Quart. (1989) 34:252–276CrossrefGoogle Scholar
  • Meindl J. R., Ehrlich S. B. The romance of leadership and the evaluation of organizational performance. Acad. Management J. (1987) 30:91–109CrossrefGoogle Scholar
  • Meindl J. R., Ehrlich S. B., Dukerich J. M. The romance of leadership. Admin. Sci. Quart. (1985) 30(1):78–102CrossrefGoogle Scholar
  • Milkovich G. T., Newman J. M.Compensation (1987) (Business Publications, Plano, TX) Google Scholar
  • Miller D., Turnbull W., McFarland C. Particularistic and universalistic evaluation in the social comparison process. J. Personality Soc. Psych. (1988) 55:908–917CrossrefGoogle Scholar
  • Murphy K. J., Ashenfelter Orley, Card David. Executive compensation. Handbook of Labor Economics (1999) Vol. 3B(Elsevier, London, UK) 2485–2557Chapter 38CrossrefGoogle Scholar
  • Nosanchuk T. A., Erickson B. How high is up? Calibrating social comparison in the real world. J. Personality Soc. Psych. (1985) 48:624–634CrossrefGoogle Scholar
  • O’Reilly C., Main B., Crystal G. CEO compensation as tournament and social comparison: A tale of two theories. Admin. Sci. Quart. (1988) 33:257–274CrossrefGoogle Scholar
  • Pfeffer J., Cummings L. L., Staw B. M. Management as symbolic action: The creation and maintenance of organizational paradigms. Research in Organizational Behavior (1981) Vol. 3(JAI Press, Greenwich, CT) 1–52Google Scholar
  • Pfeffer J., Davis-Blake A. Salary dispersion, location in the salary distribution, and turnover among college administrators. Indust. Labor Relations Rev. (1992) 45:753–763CrossrefGoogle Scholar
  • Pfeffer J., Langton N. The effect of wage dispersion on satisfaction, productivity, and working collaboratively: Evidence from college and university faculty. Admin. Sci. Quart. (1993) 38:382–407CrossrefGoogle Scholar
  • Pindyck R., Rubinfeld D.Econometric Models and Economic Forecasts (1981) (McGraw Hill, New York) Google Scholar
  • Pollock T. G., Fischer H. M., Wade J. B. The role of power and politics and in the repricing of executive options. Acad. Management J. (2002) 45:1172–1182CrossrefGoogle Scholar
  • Shefrin H., Caldwell D. F. Choice under uncertainty and individual differences: Asymmetries in the treatment of benefits and burdens. (1996) . Working paper, University of Santa Clara, Santa Clara, CAGoogle Scholar
  • Sheppard B. H., Lewicki R. J., Minton J. W.Organizational Justice: The Search for Fairness in the Workplace (1992) (Lexington Books, New York) Google Scholar
  • Siegel P. A., Hambrick D. C. Pay disparities within top management groups: Evidence of harmful effects on performance of high-technology firms. Organ. Sci. (2005) 16(3):259–274LinkGoogle Scholar
  • Simon H. A.Models of Man (1957) (Wiley, New York) Google Scholar
  • Sloan A., Underwood A. The hit men. Newsweek (1996) 127(February 26):44Google Scholar
  • Stata 8.0 Manual (2003) (Stata Press, College Station, TX) Google Scholar
  • Suls J., Wheeler L.Handbook of Social Comparison: Theory and Research (2000) (Plenum Publishers, New York) CrossrefGoogle Scholar
  • Summers T., Hendrix W. Modelling the role of pay equity perceptions: A field study. J. Occupational Psych. (1991) 64:145–157CrossrefGoogle Scholar
  • Taylor S. Asymmetrical effects of positive and negative events: The mobilization-minimization hypothesis. Psych. Bull. (1991) 110:67–85CrossrefGoogle Scholar
  • Thibaut J., Walker L.Procedural Justice: A Psychological Analysis (1975) (Erlbaum, Hillsdale, NJ) Google Scholar
  • Trevor C. O., Wazeter D. L. Reactions to objective pay conditions: Interdependence among pay structure characteristics and pay relative to internal and external referents. J. Appl. Psych. (2006) . ForthcomingCrossrefGoogle Scholar
  • Tyler T. Psychological models of the justice motive: Antecedents of distributive and procedural justice. J. Personality Soc. Psych. (1994) 67:850–863CrossrefGoogle Scholar
  • Van Dijk E., Engelen M., van Leeuwen E., Monden L., Sluijter E. Distributive justice and the allocation of costs, losses, and profits. Soc. Justice Res. (1999) 12:5–20CrossrefGoogle Scholar
  • Wade J. B., O’Reilly C., Chandratat I. Golden parachutes: CEOs and the exercise of social influence. Admin. Sci. Quart. (1990) 35:587–603CrossrefGoogle Scholar
  • Wheeler L., Koestner R., Driver R. Related attributes in the choice of comparison others: It’s there, but it isn’t all there is. J. Experiment. Soc. Psych. (1982) 18:489–500CrossrefGoogle Scholar
  • Wood J. Theory and research concerning social comparisons of personal attributes. Psych. Bull. (1989) 106:231–248CrossrefGoogle Scholar
  • Zenger T. Why do employers only reward extreme performance? Examining the relationships among performance, pay, and turnover. Admin. Sci. Quart. (1992) 37:198–219CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.