Understanding and Managing Strategic Governance. Wei Shi

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Understanding and Managing Strategic Governance - Wei Shi


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management team members can give rise to problematic social comparison, since a smaller number of officers may get large pay packages, whereas others receive less.51 Large pay dispersions can generate less cooperative teamwork and less effective overall strategy implementation, ultimately leading to lower firm performance. For instance, a large pay gap between CEOs and non-CEO top executives provides strong incentives for the latter to resort to misconduct as a means of outperforming others.52 Relatedly, high pay dispersion among employees in R&D groups leads to less innovation,53 which is especially detrimental to firms in the pharmaceutical industry or other industries that depend on innovation for continued profitability. Collective incentives focused on the top management team can also influence how much the whole firm will focus on corporate social responsibility issues.54 Also, by setting the pay culture for the firm, not only for top managers but for employees overall, the compensation committee influences strategic implementation throughout the organization.


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