Organizational governance and employee pay: How ownership structure affects the firm's compensation strategy

Steve Werner, Henry L. Tosi, Luis Gomez-Mejia

Research output: Contribution to journalArticle

71 Scopus citations

Abstract

This research investigated how the ownership structure is related to the firm's overall compensation strategy. The findings extend previous research that focused primarily on CEO compensation strategy. We show that there are significant differences in the compensation practices that apply to all employees as a function of the ownership structure. The results show that for owner-controlled firms and owner-managed firms there is significant pay/performance sensitivity for all employees. In management-controlled firms, changes in pay are related to changes in size of the firm. These findings lead us to conclude that ownership structure not only affects upper management's pay, but also the pay of all employees through substantial differences in the firm's compensation practices.

Original languageEnglish (US)
Pages (from-to)377-384
Number of pages8
JournalStrategic Management Journal
Volume26
Issue number4
DOIs
StatePublished - Apr 1 2005

Keywords

  • Employee pay
  • Executive compensation
  • Ownership structure

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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