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Article
Publication date: 1 April 2004

Pedro Ortín‐Ángel and Albert A. Cannella

We develop theoretical arguments from the efficiency wage model (Shapiro & Stiglitz, 1984) to provide better understanding of Fama’s (1980) seminal notion that executive…

Abstract

We develop theoretical arguments from the efficiency wage model (Shapiro & Stiglitz, 1984) to provide better understanding of Fama’s (1980) seminal notion that executive labor markets contribute to the alignment of executive and shareholder interests. We show how the efficiency wage model can be integrated with several other theories of executive turnover. Furthermore, the model allows for predictions that have received very little analysis to date, such as the effect of firm risk and executive salaries on turnover. We test predictions from the model on a sample of executives from 280 manufacturing firms observed annually from 1986 to 1992. Our sample includes data on over 12,000 observations and nearly 1,700 employment terminations. The results are consistent with the main predictions of the efficiency wage model. Holding performance constant, boards of directors are less patient with (more likely to dismiss) executives who have lower salaries and those in higher risk firms.

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Management Research: Journal of the Iberoamerican Academy of Management, vol. 2 no. 1
Type: Research Article
ISSN: 1536-5433

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Book part
Publication date: 21 November 2014

Marco A. Barrenechea-Méndez, Pedro Ortín-Ángel and Eduardo C. Rodes-Mayor

This chapter provides further evidence on the role of uncertainty and job complexity in pay-for-performance and autonomy decisions. It proposes an encompassing econometric…

Abstract

This chapter provides further evidence on the role of uncertainty and job complexity in pay-for-performance and autonomy decisions. It proposes an encompassing econometric approach in order to explain the differences in previous outcomes that may be due to differing methodological approaches. The main stylized fact is that autonomy and pay-for-performance are positively associated. Additionally, autonomy is positively related to job complexity and uncertainty suggesting that the relationship between these latter variables and pay-for-performance could be through autonomy. After controlling for autonomy, the positive relationship between pay-for-performance and job complexity disappears, while that between pay-for-performance and uncertainty becomes more negative.

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International Perspectives on Participation
Type: Book
ISBN: 978-1-78441-169-5

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Book part
Publication date: 21 November 2014

Abstract

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International Perspectives on Participation
Type: Book
ISBN: 978-1-78441-169-5

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