A model of person-pay interaction: How executives vary in their responses to compensation arrangements

Strategic Management Journal

Volumn 31, Issue 8, 2010, Pages 803-821

  Wowak, Adam J ^a   Hambrick, Donald C ^a  

^a PENNSYLVANIA STATE UNIVERSITY   (United States)

Author keywords

Agency theory; CEOs; Executive compensation; Upper echelons

Indexed keywords

AGENCY THEORY; COGNITIVE FRAMES; EMPIRICAL TESTING; EXECUTIVE COMPENSATION; FIRM PERFORMANCE; INCENTIVE COMPENSATION; INCENTIVE SCHEMES; INTERACTIVE EFFECT; NEW MODEL; ORGANIZATIONAL OUTCOMES; ORGANIZATIONAL PERFORMANCE; RISK TAKING; STOCK OPTIONS; STRATEGIC DECISIONS; TWO DOMAINS;

RISK ANALYSIS;

EID: 77954518967     PISSN: 01432095     EISSN: 10970266     Source Type: Journal    
DOI: 10.1002/smj.839     Document Type: Article

References (99)

1. Abrahamson E. 1991. Managerial fads and fashions: the diffusion and rejection of innovations. Academy of Management Review 16(3): 586-612.
2. Agle BR, Mitchell RK, Sonnenfeld JA. 1999. Who matters to CEOs? An investigation of stakeholder attributes and salience, corporate performance, and CEO values. Academy of Management Journal 42(5): 507-525.
3. Agle BR, Nagarajan NJ, Sonnenfeld JA, Srinivasan D. 2006. Does CEO charisma matter? An empirical analysis of the relationships among organizational performance, environmental uncertainty, and top management team perceptions of CEO charisma. Academy of Management Journal 49(1): 161-174.
4. Atkinson JW. 1964. An Introduction to Motivation. Van Nostrand: Princeton, NJ.
5. Bailey EE, Helfat CE. 2003. External management succession, human capital, and firm performance: an integrative analysis. Managerial and Decision Economics 24(4): 347-369.
6. Balkin DB, Gomez-Mejia LR. 1987. Toward a contingency theory of compensation strategy. StrategicManagement Journal 8(2): 169-182.
7. Balkin DB, Gomez-Mejia LR. 1990. Matching compensation and organizational strategies. StrategicManagement Journal 11(2): 153-169.
8. Bandura A. 1977. Self-efficacy: toward a unifying theory of behavioral change. Psychological Review 84(2): 191-215.
9. Bandura A. 1982. Self-efficacy mechanism in human agency. American Psychologist 37(2): 122-147.
10. Bandura A. 1986. Social Foundations of Thought and Action: A Social Cognitive Theory. Prentice-Hall: Englewood Cliffs, NJ.
11. Bantel KA, Jackson SE. 1989. Top management and innovations in banking: does the composition of the top team make a difference? Strategic Management Journal, Summer Special Issue 10: 107-124.
12. Barrick MR, Stewart GL, Piotrowski M. 2002. Personality and job performance: test of the mediating effects of motivation among sales representatives. Journal of Applied Psychology 87(1): 43-51.
13. Bigley GA, Wiersema M. 2002. New CEOs and corporate strategic refocusing: how experience as heir apparent influences the use of power. Administrative Science Quarterly 47(4): 707-727.
14. Brickley JA, Smith CW, Zimmerman JL. 1997. Managerial Economics and Organizational Architecture. Irwin: Chicago, IL.
15. Cable DM, Judge TA. 1994. Pay preferences and job search decisions: a person-organization fit perspective. Personnel Psychology 47(2): 317-348.
16. Cadsby CB, Song F, Tapon F. 2007. Sorting and incentive effects of pay for performance: an experimental investigation. Academy of Management Journal 50(2): 387-405.
17. Camerer C, Lovallo D. 1999. Overconfidence and excess entry: an experimental approach. American Economic Review 89(1): 306-318.
18. Carpenter MA. 2000. The price of change: the role of CEO compensation in strategic variation and deviation from industry strategy norms. Journal of Management 26(6): 1179-1198.
19. Carpenter MA, Sanders WG. 2004. The effects of top management team pay and firm internationalization on MNC performance. Journal of Management 30(4): 509-528.
20. Carpenter MA, Sanders WG, Gregersen HB. 2001 Bundling human capital with organizational context: the impact of international assignment experience on multinational firm performance and CEO pay. Academy of Management Journal 44(3): 493-511.
21. Castanias RP, Helfat CE. 2001. The managerial rents model: theory and empirical analysis. Journal of Management 27(6): 661-678.
22. Chatterjee A, Hambrick DC. 2007. It's all about me: narcissistic CEOs and their effects on company strategy and performance. Administrative Science Quarterly 52(3): 351-386.
23. Cho TS, Hambrick DC. 2006. Attention as the mediator between top management team characteristics and strategic change: the case of airline deregulation. Organization Science 17(4): 453-469.
24. Clapham SE, Schwenk CR. 1991. Self-serving attributions, managerial cognition, and company performance. Strategic Management Journal 12(3): 219-229.
25. Coles JL, Daniel ND, Naveen L. 2006. Managerial incentives and risk-taking. Journal of Financial Economics 79(2): 431-468.
26. Crossland C, Hambrick DC. 2007. How national systems differ in their constraints on corporate executives: a study of CEO effects in three countries. Strategic Management Journal 28(8): 767-789.
27. Crowe E, Higgins ET. 1997. Regulatory focus and strategic inclinations: promotion and prevention in decision-making. Organizational Behavior and Human Decision Processes 69(2): 117-132.
28. Cyert RM, March JG. 1963. A Behavioral Theory of the Firm. Blackwell: Cambridge, MA.
29. Deckop JR, Merriman KK, Blau G. 2004. Impact of variable risk preferences on the effectiveness of control by pay. Journal of Occupational and Organizational Psychology 77: 63-80.
30. Denis DJ, Hanouna P, Sarin A. 2006. Is there a dark side to incentive compensation? Journal of Corporate Finance 12(3): 467-488.
31. Devers CE, Cannella AA, Reilly GP, Yoder ME. 2007. Executive compensation: a multidisciplinary review of recent developments. Journal of Management 33(6): 1016-1072.
32. Devers CE, McNamara G, Wiseman RM, Arrfelt M. 2008. Moving closer to the action: examining compensation design effects on firm risk. Organization Science 19(4): 548-566.
33. England GW. 1967. Personal value systems of American managers. Academy of Management Journal 10(1): 53-68.
34. Finkelstein S. 2003. Why Smart Executives Fail. Penguin: New York.
35. Finkelstein S, Boyd BK. 1998. How much does the CEO matter? The role of managerial discretion in the setting of CEO compensation. Academy of Management Journal 41(2): 179-199.
36. Finkelstein S, Hambrick DC. 1988. Chief executive compensation: a synthesis and reconciliation. Strategic Management Journal 9(6): 543-558.
37. Finkelstein S, Hambrick DC. 1990. Top-managementteam tenure and organizational outcomes: the moderating role of managerial discretion. Administrative Science Quarterly 35(3): 484-503.
38. Finkelstein S, Hambrick DC. 1996. Strategic Leadership: Top Executives and Their Effects on Organizations. West: St. Paul, MN.
39. Finkelstein S, Hambrick DC, Cannella AA. 2009. Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards. Oxford University Press: New York.
40. Geletkanycz MA, Black SS. 2001. Bound by the past? Experience-based effects on commitment to the strategic status quo. Journal of Management 27(1): 3-21.
41. Gerhart B, Rynes SL. 2003. Compensation: Theory, Evidence, and Strategic Implications. Sage: Thousand Oaks, CA.
42. Ghoshal S. 2005. Bad management theories are destroying good management practices. Academy of Management Learning and Education 4(1): 75-91.
43. Gomez-Mejia LR, Wiseman RM. 1997. Reframing executive compensation: an assessment and outlook. Journal of Management 23(3): 291-374.
44. Gupta AK, Govindarajan V. 1984. Business unit strategy, managerial characteristics, and business unit effectiveness at strategy implementation. Academy of Management Journal 27(1): 25-41.
45. Haleblian JJ, Markoczy L, McNamara G. 2007. The influence of core self-evaluation on strategic choices involving risk and uncertainty. Paper presented at the annual meeting of the Academy of Management, Philadelphia, PA.
46. Hambrick DC, Fukutomi GDS. 1991. The seasons of a CEO's tenure. Academy of Management Review 16(4): 719-742.
47. Hambrick DC, Mason PA. 1984. Upper echelons: the organization as a reflection of its top managers. Academy of Management Review 9(2): 193-206.
48. Hambrick DC, Snow CC. 1989. Strategic reward systems. In Strategy, Organization Design, and Human Resource Management, Snow CC (ed). JAI Press: Greenwich, CT; 333-368.
49. Harris J, Bromiley P. 2007. Incentives to cheat: the influence of executive compensation and firm performance on financial misrepresentation. Organization Science 18(3): 350-367.
50. Haunschild PR. 1994. How much is that company worth? Interorganizational relationships, uncertainty and acquisition premiums. Administrative Science Quarterly 39(3): 391-411.
51. Hayward MLA, Hambrick DC. 1997. Explaining the premiums paid for large acquisitions: evidence of CEO hubris. Administrative Science Quarterly 42(1): 103-127.
52. Henderson AD, Miller D, Hambrick DC. 2006. How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal 27(5): 447-460.
53. Heron RA, Lie E. 2007. Does backdating explain the stock price pattern around executive stock option grants? Journal of Financial Economics 83(2): 271-295.
54. Higgins ET. 1997. Beyond pleasure and pain. American Psychologist 52(12): 1280-1300.
55. Higgins ET. 1998. Promotion and prevention: regulatory focus as a motivational principle. In Advances in Experimental Social Psychology, (Volume 30), Zanna M (ed.). Academic Press: San Diego, CA; 1-46.
56. Hofstede G. 1980. Culture's Consequences: International Differences in Work-Related Values. Sage: Beverly Hills, CA.
57. Hoskisson RE, Hitt MA, Hill CWL. 1993. Managerial incentives and investment in R&D in large multiproduct firms. Organization Science 4(2): 325-341.
58. Jensen MC, Meckling W. 1976. Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3(4): 305-360.
59. Jensen MC, Murphy KJ. 1990. Performance pay and topmanagement incentives. Journal of Political Economy 98(2): 225-264.
60. Judge TA, Ilies R. 2002. Relationship of personality to performance motivation: a meta-analytic review. Journal of Applied Psychology 87(4): 797-807.
61. Khurana R. 2002. Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs. Princeton University Press: Princeton, NJ.
62. Krueger N, Dickson PR. 1994. How believing in ourselves increases risk taking: perceived self-efficacy and opportunity recognition. Decision Sciences 25(3): 385-400.
63. Lant TK, Milliken FJ, Batra B. 1992. The role of managerial learning and interpretation in strategic persistence and reorientation: an empirical exploration. Strategic Management Journal 13(8): 585-608.
64. Larcker DF. 1983. The association between performance plan adoption and corporate capital investment. Journal of Accounting and Economics 5(1): 9-30.
65. Lawrence PR, Lorsch JW. 1967. Differentiation and integration in complex organizations. Administrative Science Quarterly 12(1): 1-47.
66. Lazear EP, Rosen S. 1981. Rank-order tournaments as optimum labor contracts. Journal of Political Economy 89(5): 841-864.
67. Liberman N, Idson LC, Camacho CJ, Higgins ET. 1999. Promotion and prevention choices between stability and change. Journal of Personality and Social Psychology 77(6): 1135-1145.
68. Lieberson S, O'Connor JF. 1972. Leadership and organizational performance: a study of large corporations. American Sociological Review 37(2): 117-130.
69. Locke EA, Frederick E, Lee C, Bobko P. 1984. Effect of self-efficacy, goals, and task strategies on task performance. Journal of Applied Psychology 69(2): 241-251.
70. MacCrimmon KR, Wehrung DA. 1990. Characteristics of risk taking executives. Management Science 36(4): 422-435.
71. Malmendier U, Tate G. 2005. CEO overconfidence and corporate investment. Journal of Finance 60(6): 2661-2700.
72. March JG, Simon HA. 1958. Organizations. Wiley: New York.
73. Miles RE, Snow CC. 1978. Organizational Strategy, Structure, and Process. McGraw-Hill: New York.
74. Miller D. 1991. Stale in the saddle: CEO tenure and the match between organization and environment. Management Science 37(1): 34-52.
75. Miller D, Kets de Vries MFR, Toulouse J-M. 1982. Top executive locus of control and its relationship to strategy-making, structure, and environment. Academy of Management Journal 25(2): 237-253.
76. Palia D. 2000. The impact of regulation on CEO labor markets. Rand Journal of Economics 31(1): 165-179.
77. Pappas JM, Flaherty KE. 2006. The moderating role of individual- difference variables in compensation research. Journal of Managerial Psychology 21(1): 19-35.
78. Peterson RS, Smith DB, Martorana PV, Owens PD. 2003. The impact of chief executive officer personality on top management team dynamics: one mechanism by which leadership affects organizational performance. Journal of Applied Psychology 88(5): 795-808.
79. Puri M, Robinson DT. 2007. Optimism and economic choice. Journal of Financial Economics 86(1): 71-99.
80. Rajagopalan N, Finkelstein S. 1992. Effects of strategic orientation and environmental change on senior management reward systems. Strategic Management Journal, Summer Special Issue 13: 127-141.
81. Rajgopal S, Shevlin T. 2002. Empirical evidence on the relation between stock option compensation and risk taking. Journal of Accounting and Economics 33(2): 145-171.
82. Richins ML, Dawson S. 1992. A consumer values orientation for materialism and its measurement: scale development and validation. Journal of Consumer Research 19(3): 303-316.
83. Rokeach M. 1973. The Nature of Human Values. Free Press: New York.
84. Salancik GR, Meindl JR. 1984. Corporate attributions as strategic illusions of management control. Administrative Science Quarterly 29(2): 238-254.
85. Sanders WG. 2001. Behavioral responses of CEOs to stock ownership and stock option pay. Academy of Management Journal 44(3): 477-492.
86. Sanders WG, Hambrick DC. 2007. Swinging for the fences: the effects of CEO stock options on company risk-taking. Academy of Management Journal 50(5): 1055-1078.
87. Shaw JD, Gupta N, Delery JE. 2002. Pay dispersion and workforce performance: moderating effects of incentives and interdependence. Strategic Management Journal 23(6): 491-512.
88. Smith JE, Carson KP, Alexander RA. 1984. Leadership: it can make a difference. Academy of Management Journal 27(4): 765-776.
89. Starbuck WH, Milliken FJ. 1988. Executives' perceptual filters: what they notice and how they make sense. In Concepts and Methods for Studying Top Managers, Hambrick DC (ed.). JAI Press: Greenwich, CT; 35-65.
90. Stephan J, Murmann JP, Boeker W, Goodstein J. 2003. Bringing managers into theories of multimarket competition: CEOs and the determinants of market entry. Organization Science 14(4): 403-421.
91. Thomas JB, McDaniel RR. 1990. Interpreting strategic issues: effects of strategy and the informationprocessing structure of top management teams. Academy of Management Journal 33(2): 286-306.
92. Tyler BB, Steensma HK. 1998. The effects of executives' experiences and perceptions on their assessment of potential technological alliances. Strategic Management Journal 19(10): 939-965.
93. Venkatraman N. 1989. The concept of fit in strategy research: toward verbal and statistical correspondence. Academy of Management Review 14(3): 423-444.
94. Vroom VH. 1964. Work and Motivation. Wiley: New York.
95. Westphal JD. 1998. Board games: how CEOs adapt to increases in structural board independence from management. Administrative Science Quarterly 43(3): 511-537.
96. Wiersema MF, Bantel KA. 1992. Top management team demography and corporate strategic change. Academy of Management Journal 35(1): 91-121.
97. Wright P, Kroll M, Krug JA, Pettus M. 2007. Influences of top management team incentives on firm risk taking. Strategic Management Journal 28(1): 81-89.
98. Zajac EJ, Westphal JD. 1996. Who shall succeed? How CEO board preferences and power affect the choice of new CEOs. Academy of Management Journal 39(1): 64-90.
99. Zald MN. 1965. Who shall rule? A political analysis of succession in a large welfare organization. Pacific Sociological Review 8(1): 52-60.