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Article
Publication date: 16 July 2020

Muhammad Usman, Muhammad Abubakkar Siddique, Muhammad Abdul Majid Makki, Ammar Ali Gull, Ali Dardour and Junming Yin

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm…

Abstract

Purpose

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm performance in Chinese companies. The authors also investigate whether the independent compensation committee composed of all male directors is effective in designing the optimal contract for executives.

Design/methodology/approach

The authors use data from A-share listed companies on the Shenzhen and Shanghai stock exchanges from 2005 to 2015. As a baseline methodology, the authors use pooled ordinary least square (OLS) regression to draw inferences. In addition, cluster OLS regression, two-stage least square regression, the two-stage Heckman test and the propensity score matching method are also used to control for endogeneity issues.

Findings

The authors find evidence that an independent or gender-diverse compensation committee strengthens the link between top managers' pay and firm performance; that the presence of a woman on the compensation committee enhances the positive influence of committee independence on this relationship; that a compensation committee's independence or gender diversity is more effective in designing top managers' compensation in legal-person-controlled firms than they are in state-controlled firms; that gender diversity on the compensation committee is negatively associated with top managers' total pay; and that an independent compensation committee pays top managers more.

Practical implications

The study results highlight the role of an independent compensation committee in designing optimal contracts for top managers. The authors provide empirical evidence that a woman on the compensation committee strengthens its objectivity in determining top managers' compensation. The study finding supports regulatory bodies' recommendations regarding independent and women directors.

Social implications

The study findings contribute to the recent debate about gender equality around the globe. Given the discrimination against women, many regulatory bodies mandate a quota for women on corporate boards. The study findings support the regulatory bodies' recommendations by highlighting the economic benefit of having women in top management positions.

Originality/value

This study contributes to literature by investigating the largely overlooked questions of whether having a gender-diverse or independent compensation committee strengthens the relationship between top managers' pay and firm performance; whether an independent compensation committee is more efficient in setting executives' pay when it is gender-diverse; and whether the effect of independent directors and female directors on top managers' compensation varies based on the firm's ownership structure. Overall, the main contribution of the study is that the authors provide robust empirical evidence in support of the managerial power axiom.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 1 April 2003

Gregorio Sánchez Marín and Antonio Aragón Sánchez

This paper analyzes the links among executive compensation, a firm’s strategic orientation, and firm performance. A number of key questions relative to the relationships…

Abstract

This paper analyzes the links among executive compensation, a firm’s strategic orientation, and firm performance. A number of key questions relative to the relationships among these elements remain unanswered because prior research on this subject has reported mixed results, and, moreover, has been confined almost exclusively to U.S. firms. We develop a framework that draws on arguments from agency theory to identify such links. A research design with both archival and survey data is used to test hypotheses in a sample of 253 Spanish companies. We found that top managerscompensation systems are linked with a firm’s strategic orientations, but in a different form than that of previous studies. Results show two differentiated groups of firms: (1) prospective firms that adapt their managerial compensation systems to the requirements of strategic context, consequently obtaining positive performance effects; and (2) conservative firms that design managerial compensation systems independent of strategic context, consequently not obtaining additional performance benefits.

Details

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

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Article
Publication date: 10 June 2020

Yoonhee Choi and Namgyoo K. Park

This paper aims to examine the economic and psychological mechanisms in turnover at the managerial level. The paper investigates how (1) the ease of moving posed by…

Abstract

Purpose

This paper aims to examine the economic and psychological mechanisms in turnover at the managerial level. The paper investigates how (1) the ease of moving posed by alternative jobs (i.e. the economic mechanism) and (2) the desire to move due to low job satisfaction (i.e. the psychological mechanism) simultaneously influence top management team (TMT) turnover and these managers' subsequent job position and pay.

Design/methodology/approach

Using 25 years of panel data on more than 2,000 top managers in the United States, the paper utilizes fixed-effects logistic regressions and the ordinary least squares model to test the hypotheses.

Findings

The authors find that CEO awards (an economic mechanism) and low compensation (a psychological mechanism) independently have positive effects on turnover. Turnover due to the economic mechanism leads to a higher position and pay, whereas turnover due to the psychological mechanism does not guarantee the same outcome. Further, when examining how pay dissatisfaction influences turnover simultaneously with CEO awards, the authors find that managers with the highest pay leave their firm, and not those with the lowest pay.

Originality/value

The paper employs the pull-and-push theory in the employee turnover literature and applies it to the top management team literature. By doing so, this paper contributes original insights to how economic and psychological mechanisms simultaneously affect managerial turnover and its subsequent outcomes.

Details

Management Decision, vol. 58 no. 12
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 13 May 2014

Gregorio Sanchez-Marin and J. Samuel Baixauli-Soler

The purpose of this paper is to clarify the influence of chief executive officer (CEO) reputation on top management team (TMT) compensation, proposing corporate governance…

Abstract

Purpose

The purpose of this paper is to clarify the influence of chief executive officer (CEO) reputation on top management team (TMT) compensation, proposing corporate governance characteristics as a moderator of the relationships between the power of top managers to extract rents and the importance of external signals. The study aims to expand the domain of executive compensation literature by including the role of CEO reputation in the context of non-Anglo-Saxon corporate governance systems.

Design/methodology/approach

The paper opted for a panel methodology for the period 2004-2009, including 534 observations from Spanish listed companies. Data were obtained from several sources. Compensation and governance information was obtained from the Spanish Stock Exchange National Commission; data regarding CEO reputation were obtained from Spanish Corporate Reputation Monitor, and, finally, financial statement was obtained from the OSIRIS database.

Findings

The paper provides empirical insights on the CEO reputation diffusion on TMT compensation, showing different scenarios depending on effectiveness of corporate governance. CEO reputation diffusion on TMT pay is strengthened or weakened by the organizational governance effectiveness. General evidence supports the notion that in countries characterized by an incomplete corporate governance system, boards – and also indirectly the structure of ownership – act as a catalyst for external signs of legitimacy, rather than for the organization's and stakeholders’ interests.

Research limitations/implications

Because of the difficulty in pooling information for a long period from three different sources of data, the number of observations is not very large. Therefore, researchers are encouraged to test the proposed propositions further using other context of corporate governance.

Practical implications

The paper includes implications for the development of effective governance mechanisms which promote an adequate link between the CEO reputation and the TMT compensation, avoiding rent extractions.

Originality/value

The paper contributes to new international evidences regarding relations between top managers’ reputations and compensation. Specifically, it allows reinforcement of the importance of institutional arguments in the understanding of the effectiveness of governance mechanisms in large listed companies.

Details

Management Decision, vol. 52 no. 3
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 2 November 2015

Ci-Rong Li, Chen-Ju Lin and Yun-Hsiang Tien

The purpose of this paper is to explore the role of CEO transformational leadership in promoting ambidexterity of top managers. This paper posits that connecting CEO…

Abstract

Purpose

The purpose of this paper is to explore the role of CEO transformational leadership in promoting ambidexterity of top managers. This paper posits that connecting CEO transformational leadership with the CEO-top manager interface offers a better explanation of heterogeneity in top manager ambidextrous behavior.

Design/methodology/approach

This study is based on a questionnaire survey of 388 senior managers in 80 top teams nested in 80 small- to medium-sized Taiwan manufacturing firms.

Findings

The findings indicate that transformational CEOs shape the CEO-top manager interface, characterized by senior team behavioral integration, decentralization of responsibilities, long-term compensation, and individual manager risk propensity, and in turn promote ambidexterity at the individual top manager level.

Originality/value

Hence, the authors contribute to the existing understanding that transformational CEOs may not only have a beneficial influence on firm-level ambidexterity, but also may be particularly effective in enabling individual-level top managers to simultaneously explore and exploit.

Details

Leadership & Organization Development Journal, vol. 36 no. 8
Type: Research Article
ISSN: 0143-7739

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Article
Publication date: 26 April 2013

Lin Xiu

This study aims to examine the gender pay gap in organizational leadership positions in China. The author seeks to analyse how much of the gap is explained by differences…

Abstract

Purpose

This study aims to examine the gender pay gap in organizational leadership positions in China. The author seeks to analyse how much of the gap is explained by differences in individual characteristics and how much is explained by firm characteristics.

Design/methodology/approach

This study estimates pay functions based on a unique data set from a survey of private firms and top managers in Liuzhou, Guangxi, China.

Findings

Female managers receive much lower pay than male managers in China. A larger portion of the gender earnings gap can be attributed to firm‐level characteristics than individual characteristics. Female managers tend to have fewer firm‐level characteristics that are associated with higher pay, and when they do, they tend to receive a smaller pay premium for those characteristics. This is especially the case for the firm size variable where female managers are less likely to be employed in higher paying large firms, and when they are, they receive a smaller firm‐size premium.

Research limitations/implications

This study uses a sample of small and medium‐sized enterprises (SMEs) in China. As such, the gender pay gap in larger firms or firms in large cities (e.g. Beijing or Shanghai) may not be represented by the findings of this study.

Practical implications

This study offers insights on how women executives are paid after they cross the “glass ceiling” and enter the managerial ranks in China. Female executives should be aware of the effects of firm characteristics on gender differences in compensation.

Originality/value

This study adds to the limited empirical literature on the gender pay gap among top executives using a matched establishment‐manager data set in China.

Details

Evidence-based HRM: a Global Forum for Empirical Scholarship, vol. 1 no. 1
Type: Research Article
ISSN: 2049-3983

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Article
Publication date: 1 July 2005

Gregorio Sánchez Marín and Antonio Aragón Sánchez

This paper analyzes the effect of strategic context on managerial compensation design, and the interactive influence on firm performance for a set of Spanish companies…

Abstract

This paper analyzes the effect of strategic context on managerial compensation design, and the interactive influence on firm performance for a set of Spanish companies. Specifically, this study examines the performance implications of the fit between different managerial compensation systems and diverse firm’s strategic orientations – representing various levels of managerial discretion. Based on a framework combining agency theory and managerial discretion concept, a research design with both archival and survey data is used to test hypotheses in a sample of 82 firms. The findings offer sufficient confirmation of theoretical arguments, providing extensions of this research stream for non‐U.S. firms. Results show that firms benefit from the design of managerial compensation systems when they match the managerial control and risk‐bearing requirements imposed by the strategic context. Specifically, risk‐encouraging compensation systems are better for prospector firms – high level of managerial discretion – whereas risk‐discouraging compensation systems are better for defender firms – low level of managerial discretion.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 3 no. 2
Type: Research Article
ISSN: 1536-5433

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Article
Publication date: 1 March 2004

Venkat R. Krishnan and Ranjini Sivakumar

This longitudinal study looked at the impact of top managers’ personal power and structural power on divestiture two years later, using a sample of 46 sales and spin‐offs…

Abstract

This longitudinal study looked at the impact of top managers’ personal power and structural power on divestiture two years later, using a sample of 46 sales and spin‐offs and a set of 46 control firms matched by size and industry in the USA. The impact of divestiture on top managers’ power during the two years following the divestiture was also looked at. Results of pair‐wise matched t‐tests reveal that firms whose top managers have less structural power are more likely to divest one year later. Logistic regression analysis shows that top managers’ structural power continues to predict divestiture one year later, even after controlling for change in net income and change in earnings per share. Divestiture also seems to result in less structural power of top managers during the two years after divestiture.

Details

Corporate Governance: The international journal of business in society, vol. 4 no. 1
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 2 August 2013

Wen-Ting Lin and Kuei-Yang Cheng

The purpose of this paper is to examine the effects of the compensation level and the gap between the chief executive officer (CEO) and the top management team (TMT) with…

Abstract

Purpose

The purpose of this paper is to examine the effects of the compensation level and the gap between the chief executive officer (CEO) and the top management team (TMT) with respect to the rhythm of firm internationalization.

Design/methodology/approach

The approach takes the form of an empirical analysis. The authors use longitudinal data (1997-2006) of a sample of 345 publicly-listed firms in Taiwan.

Findings

The results show that higher CEO compensation will lead to regular foreign expansion. The CEO–TMT compensation gap has a curvilinear effect on the rhythm of firm internationalization.

Research limitations/implications

These findings highlight that the compensation structure has a significant influence on a firm ' s internationalization strategy. This research contributes to the literature linking strategic human resource management and corporate strategy in terms of firm internationalization.

Practical implications

When firms consider regular foreign expansion, the compensation committee should design a high total compensation level and appropriate the compensation gap between the CEO and TMT members.

Originality/value

This study sheds light on how the compensation of the upper echelons determines whether the internationalization rhythm is regular or irregular. Moreover, the study examines how internal contingencies, such as performance, moderate the relationship between the upper echelons’ compensation and the internationalization rhythm.

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Article
Publication date: 2 October 2017

Ramzi Benkraiem, Amal Hamrouni, Faten Lakhal and Nadia Toumi

This paper aims to investigate the joint effect of board independence and gender diversity on the effectiveness of boards in monitoring CEO compensation in a continental…

Abstract

Purpose

This paper aims to investigate the joint effect of board independence and gender diversity on the effectiveness of boards in monitoring CEO compensation in a continental European context, i.e. France.

Design/methodology/approach

Fixed-effect regressions are used to study the impact of board independence, gender diversity and their interaction, i.e. the proportion of female independent directors on the different components of CEO compensation (total, fixed and variable).

Findings

The authors observe that both the proportions of independent directors and women sitting on the boards positively influence the various components of CEO compensation. However, the interaction of these factors, i.e. the proportion of female independent directors, is negatively associated with CEO compensation. These results suggest that independent women directors improve board effectiveness in monitoring CEO compensation, especially its fixed component.

Originality/value

The results of this research help to elucidate the importance of women being appointed to boards as independent directors to properly monitor managerial pay. These results provide support to the approach of the French Cope-Zimmerman law of January 2011, which promotes female representation on boards as independent directors to enhance board decision-making. Thus, evidence presented and discussed in this paper should provide useful insights for academics, corporate managers and regulators.

Details

Corporate Governance: The International Journal of Business in Society, vol. 17 no. 5
Type: Research Article
ISSN: 1472-0701

Keywords

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