Do CEOs receive the pay they deserve? A new vantage on a familiar question
2018
Purpose
This paper aims to explore the implications of Aguinis and colleagues’ study, and in particular their claim that the inconsistency between chief executive officer (CEO) pay and CEO performance is reflective of a fundamental injustice. In doing so, the authors highlight issues regarding the meaning of fairness in the context of CEO pay, the extent to which CEOs can personally affect firm performance and the challenges in ascertaining whether CEOs are overpaid, underpaid or appropriately paid.
Design/methodology/approach
The authors use a conceptual approach, integrating research on executive compensation and managerial discretion to lend nuance to Aguinis and colleagues’ arguments and findings.
Findings
The main takeaway of the commentary is that CEO pay fairness is a complex and multifaceted matter that can be difficult to broadly characterize. The evidence offered by Aguinis and colleagues regarding power law distributions and the weak overlap between CEO pay and CEO performance is compelling, but questions about income inequality and pay fairness rarely lend themselves to straightforward answers. Some caution is thus warranted when evaluating Aguinis and colleagues’ conclusion that the US CEO labor market is pervasively unfair.
Originality/value
The authors urge scholars who build on the work of Aguinis and colleagues to pay heed to the challenges in reconciling the twin concepts of CEO pay and CEO performance.
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