CEO pay is indeed decoupled from CEO performance: charting a path for the future

Herman Aguinis, Luis Gomez-Mejia, Geoffrey P. Martin, Harry Joo

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

Purpose: The purpose of the study is to set a research agenda so that future conceptual and empirical research can improve the understanding of why CEO pay and CEO performance are decoupled. Design/methodology/approach: The paper compiles and adds to many of the explanations provided by this special issue’s nine commentaries regarding why CEO pay and CEO performance are decoupled. These explanations were grouped into two categories: economic (e.g. marginal productivity theory, agency theory and behavioral agency model) and social-institutional-psychological (e.g. CEO individual differences and characteristics and CEO-organization interactions). Moreover, new analyses based on additional data were conducted to examine measurement-related explanations for the observed pay-performance decoupling. Findings: Results based on alternative measures of pay and performance confirmed, once again, the existence of pay-performance decoupling. Research limitations/implications: This paper will stimulate research pitting theoretical explanations against each other to understand their relative validity in different contexts. Practical implications: The paper informs ongoing efforts to link CEO pay to performance. Social implications: The paper also revisits the decoupling of CEO pay and firm performance from a normative and value-based perspective (i.e. regarding whether pay and performance should be related). Originality/value: The paper clarifies that the articles in this special issue largely concluded that CEO pay is decoupled from CEO performance.

Original languageEnglish (US)
Pages (from-to)117-136
Number of pages20
JournalManagement Research
Volume16
Issue number1
DOIs
StatePublished - Jan 1 2018

Keywords

  • Agency
  • Chief executive officers, CEOs
  • Corporate governance
  • Executive compensation
  • Firm performance
  • Justice
  • Power

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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