Minding the Gap: Antecedents and Consequences of Top Management-To-Worker Pay Dispersion Academic Article uri icon

abstract

  • Management researchers have long been concerned with the antecedents and consequences of managerial compensation. More recently, scholarly and popular attention has turned to the gap in pay between workers at the highest and lowest levels of the organization, or pay dispersion. This study investigates the performance implications of pay dispersion on a longitudinal (10-year) sample of publicly traded firms from multiple industries. We combine explanations based on tournament theory and equity theory to develop a model wherein pay dispersion has opposing effects on a firms short-term performance and their trend in performance over time. We also show that ownership is a key antecedent of pay dispersion. Specifically, transient institutional investors (who have short time horizons and equity stakes in a wide variety of firms) positively influence pay dispersion whereas dedicated institutional investors (who have longer investment time horizons and equity stakes in fewer firms) negatively influence pay dispersion. We discuss the wide-ranging implications of these findings for scholars, managers, and policy makers alike.

published proceedings

  • JOURNAL OF MANAGEMENT

altmetric score

  • 20.25

author list (cited authors)

  • Connelly, B. L., Haynes, K. T., Tihanyi, L., Gamache, D. L., & Devers, C. E.

citation count

  • 89

complete list of authors

  • Connelly, Brian L||Haynes, Katalin Takacs||Tihanyi, Laszlo||Gamache, Daniel L||Devers, Cynthia E

publication date

  • May 2016