The impact of pay on CEO turnover: A test of two perspectives

Wei Shen, Richard J. Gentry, Henry L. Tosi

Research output: Contribution to journalArticle

19 Scopus citations

Abstract

We investigate the impact of pay on CEO turnover from two perspectives. One is managerial power perspective that focuses on power in the setting of CEO pay. The other is tournament theory that treats CEO pay as a top prize designed to motivate executives to work hard for the top position. Building on research that highlights the impact of power dynamics at the top of the firm on CEO turnover, we propose that managerial power perspective suggests a negative impact of CEO pay on CEO turnover, while tournament theory suggests a positive impact. Using data from a sample of 313 large U.S. companies from 1988 to 1997, we find that both the level of CEO pay and its ratio over the average pay of the firm's four other highest paid executives have a negative impact on CEO turnover.

Original languageEnglish (US)
Pages (from-to)729-734
Number of pages6
JournalJournal of Business Research
Volume63
Issue number7
DOIs
StatePublished - Jul 1 2010
Externally publishedYes

Keywords

  • Executive pay
  • Executive turnover
  • Managerial power
  • Tournament theory

ASJC Scopus subject areas

  • Marketing

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