Prof. Gerard Sanders (Rice University)

Program

• Date: 16.10.2008
  Time: 16:15 - 17:45
  Location: Room 305, Ludwigstr. 28/VG

Antecedents and Consequences of Pay Disperson in the CEO's Top Team

Research on pay dispersion in top management teams has not explained why such dispersion varies across firms, and has provided conflicting evidence regarding its impact.  Here, the antecedents and consequences of pay dispersion are studied by focusing on the social comparisons that occur among members of CEO’s top team, which explicitly excludes that executive.  Results from a sample of large public firms indicate that when members of this elite group were similar on a variety of dimensions, and thus likely to be common referents, the board allowed less dispersion.  There was also a negative relationship between the level of pay dispersion in the CEO’s top team and company performance, but the strength of that relationship varied depending on the distribution of stock options.  Specifically, the negative effect was particularly strong in firms where significant differences in the options granted combined with a volatile stock price to give some team members the opportunity to realize very large financial gains in the future.  The combined results have important implications for top team dynamics, executive pay dispersion, and the nature of board influence.