Group polarization in board decisions about CEO compensation

Organization Science

Volumn 25, Issue 2, 2014, Pages 552-571

  Zhu, David H ^a  

^a ARIZONA STATE UNIVERSITY   (United States)

Author keywords

Boards of directors; CEO compensation; Corporate governance; Demography; Diffusion; Diversity; Group polarization; Group processes and performance; Interlock networks; Power and politics

Indexed keywords

EID: 84897856934     PISSN: 10477039     EISSN: 15265455     Source Type: Journal    
DOI: 10.1287/orsc.2013.0848     Document Type: Article

References (97)

1. Ansari SM, Fiss PC, Zajac EJ (2010) Made to fit: How practices vary as they diffuse. Acad. Management Rev. 35(1):67-92.
2. Baron RS, Kerr NL (2003) Group Process, Group Decision, Group Action, 2nd ed. (Open University Press, Buckingham, UK).
3. Baron RS, Hoppe SI, Kao CF, Brunsman B, Linneweh B, Rogers D (1996) Social corroboration and opinion extremity. J. Experiment. Soc. Psych. 32(6):537-560.
4. Bebchuk LA, Fried JA (2003) Executive compensation as an agency problem. J. Econom. Perspect. 17(3):71-92.
5. Beckman CM, Haunschild PR (2002) Network learning: The effects of partners' heterogeneity of experience on corporate acquisitions. Admin. Sci. Quart. 47(1):92-124.
6. Belsley DA, Kuh E, Welsch RE (1980) Regression Diagnostics: Identifying Influential Data and Sources of Collinearity (John Wiley & Sons, New York).
7. Bizjak JM, Lemmon ML, Naveen L (2008) Does the use of peer groups contribute to higher pay and less efficient compensation? J. Financial Econom. 90(2):152-168.
8. Boyd BK (1995) CEO duality and firm performance: A contingency model. Strategic Management J. 16(4):301-312.
9. Bunderson JS (2003) Team member functional background and involvement in management teams: Direct effects and the moderating role of power centralization. Acad. Management J. 46(4):458-474.
10. Burnstein E, Vinokur A (1973) Testing 2 classes of theories about group induced shifts in individual choice. J. Experiment. Soc. Psych. 9(2):123-137.
11. Burnstein E, Vinokur A (1977) Persuasive argumentation and socialcomparison as determinants of attitude polarization. J. Experiment. Soc. Psych. 13(4):315-332.
12. Buss DM, Barnes M (1986) Preferences in human mate selection. J. Personality Soc. Psych. 50(3):559-570.
13. Cooper J, Fazio RH (1984) A new look at dissonance. Berkowitz L, ed. Advances in Experimental Social Psychology (Academic Press, New York), 227-266.
14. Crystal GS (1984) Questions and Answers on Executive Compensation (Prentice-Hall, Englewood Cliffs, NJ).
15. Cyert RM, March JG (1963) A Behavioral Theory of the Firm (Prentice-Hall, Englewood Cliffs, NJ).
16. Dalton DR, Daily CM, Ellstrand AE, Johnson JL (1998) Metaanalytic reviews of board composition, leadership structure, and financial performance. Strategic Management J. 19(3):269-290.
17. Dasgupta N, Banaji MR, Abelson RP (1999) Group entitativity and group perception: Associations between physical features and psychological judgment. J. Personality Soc. Psych. 77(5):991-1003.
18. Davis GF (1991) Agents without principles: The spread of the poison pill through the intercorporate network. Admin. Sci. Quart. 36(4):583-613.
19. Davis GF, Yoo M, Baker WE (2003) The small world of the American corporate elite, 1982-2001. Strategic Organ. 1(3):301-326.
20. Davis JH, Schoorman FD, Donaldson L (1997) Toward a stewardship theory of management. Acad. Management Rev. 22(1):20-47.
21. DeBono KG, Klein C (1993) Source expertise and persuasion: The moderating role of recipient dogmatism. Personality Soc. Psych. Bull. 19(2):167-173.
22. Devers CE, Cannella AA, Reilly GP, Yoder ME (2007) Executive compensation: A multidisciplinary review of recent developments. J. Management 33(6):1016-1072.
23. Echterhoff G, Higgins ET, Groll S (2005) Audience-tuning effects on memory: The role of shared reality. J. Personality Soc. Psych. 89(3):257-276.
24. Esser JK (1998) Alive and well after 25 years: A review of groupthink research. Organ. Behav. Human Decision Processes 73(2-3): 116-141.
25. Ezzamel M, Watson R (1998) Market comparison earnings and the bidding-up of executive cash compensation: Evidence from the United Kingdom. Acad. Management J. 41(2):221-231.
26. Fama EF, Jensen MC (1983) Agency problems and residual claims. J. Law Econom. 26(2):327-349.
27. Festinger L (1957) A Theory of Cognitive Dissonance (Row, Peterson, Evanston, IL).
28. Finkelstein S (1992) Power in top management teams: Dimensions, measurement, and validation. Acad. Management J. 35(3):505-538.
29. Finkelstein S, Haleblian J (2002) Understanding acquisition performance: The role of transfer effects. Organ. Sci. 13(1):36-47.
30. Finkelstein S, Hambrick DC, Cannella AA (2009) Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards (Oxford University Press, Oxford, UK).
31. Fiske ST, Taylor SE (2008) Social Cognition: From Brains to Culture, 3rd ed. (McGraw-Hill, New York).
32. Fong EA, Misangyi VF, Tosi HL (2010) The effect of CEO pay deviations on CEO withdrawal, firm size, and firm profits. Strategic Management J. 31(6):629-651.
33. Forsyth DR (2010) Group Dynamics, 5th ed. (Thomson Wadsworth, Belmont, CA).
34. Friedkin NE (1999) Choice shift and group polarization. Amer. Sociol. Rev. 64(6):856-875.
35. Gabaix X, Landier A (2008) Why has CEO pay increased so much? Quart. J. Econom. 123(1):49-100.
36. Glick WH, Miller CC, Huber GP (1993) The impact of upperechelon diversity on organizational performance. Huber GP, Glick WH, eds. Organizational Change and Redesign: Ideas and Insights for Improving Performance (Oxford University Press, New York), 176-214.
37. Gomez-Mejia L, Wiseman RM (1997) Reframing executive compensations: An assessment and outlook. J. Management 23(3):291-374.
38. Gomez-Mejia LR (1992) Structure and process of diversification, compensation strategy, and firm performance. Strategic Management J. 13(5):381-397.
39. Greve HR (2003) A behavioral theory of R&D expenditures and innovations: Evidence from shipbuilding. Acad. Management J. 46(6):685-702.
40. Hambrick DC, Mason PA (1984) Upper echelons: The organization as a reflection of its top managers. Acad. Management Rev. 9(2):193-206.
41. Hambrick DC, Cho TS, Chen MJ (1996) The influence of top management team heterogeneity on firms' competitive moves. Admin. Sci. Quart. 41(4):659-684.
42. Harmon-Jones E, Mills J (1999) Cognitive Dissonance: Progress on A Pivotal Theory in Social Psychology (American Psychological Association, Washington, DC).
43. Haunschild PR (1993) Interorganizational imitation: The impact of interlocks on corporate acquisition activity. Admin. Sci. Quart. 38(4):564-592.
44. Hayes RM, Schaefer S (2009) CEO pay and the Lake Wobegon effect. J. Financial Econom. 94(2):280-290.
45. Henderson AD, Fredrickson JW (1996) Information-processing demands as a determinant of CEO compensation. Acad. Management J. 39(3):575-606.
46. Hoskisson RE, Hitt MA, Johnson RA, Moesel DD (1993) Construct validity of an objective (entropy) categorical measure of diversification strategy. Strategic Management J. 14(3):215-235.
47. Hubbard RG, Palia D (1995) Executive pay and performance: Evidence from the U.S. banking industry. J. Financial Econom. 39(1):105-130.
48. Isenberg DJ (1986) Group polarization: A critical review and metaanalysis. J. Personality Soc. Psych. 50(6):1141-1151.
49. Islam MR, Hewstone M (1993) Intergroup attributions and affective consequences in majority and minority groups. J. Personality Soc. Psych. 64(6):936-950.
50. Jackson JE (1991) A User's Guide to Principle Components (John Wiley&Sons, New York).
51. Janis I (1972) Victims of Groupthink (Houghton Mifflin, Boston).
52. Kalven HG Jr, Zeisel H, eds. (1966) The American Jury (University of Chicago Press, Chicago).
53. Kilduff M, Angelmar R, Mehra A (2000) Top management-team diversity and firm performance: Examining the role of cognitions. Organ. Sci. 11(1):21-34.
54. Levinthal DA, March JG (1993) The myopia of learning. Strategic Management J. 14(S2):95-112.
55. Liang K-Y, Zenger SL (1986) Longitudinal data analysis using generalized linear models. Biometrika 73(1):13-22.
56. Lorsch JW, Maclver E (1989) Pawns or Potentates: The Reality of American's Corporate Boards (Harvard Business School Press, Boston).
57. MacCallum RC, Browne MW (1993) The use of causal indicators in covariance structure models: Some practical issues. Psych. Bull. 114(3):533-541.
58. McDonald ML, Khanna P, Westphal JD (2008) Getting them to think outside the circle: Corporate governance, CEOs' external advice networks, and firm performance. Acad. Management J. 51(3):453-475.
59. Miller DT, McFarland C (1991) When social comparison goes away: The case of pluralistic ignorance. Suls J, Wills TA, eds. Social Comparison: Contemporary Theory and Research (Lawrence Erlbaum Associates, Hillsdale, NJ), 287-313.
60. Milliken FJ, Martins LL (1996) Searching for common threads: Understanding the multiple effects of diversity in organizational groups. Acad. Management Rev. 21(2):402-433.
61. Mizruchi MS (1996) What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates. Annual Rev. Sociol. 22:271-298.
62. Moscovici S, Doise W (1994) Conflict and Consensus: A General Theory of Collective Decisions (Sage, London).
63. Myers DG, Lamm H (1976) Group polarization phenomenon. Psych. Bull. 83(4):602-627.
64. O'Reilly CA, Main BG, Crystal GS (1988) CEO compensation as tournament and social comparison: A tale of two theories. Admin. Sci. Quart. 33(2):257-274.
65. Palmer DA, Jennings PD, Zhou XG (1993) Late adoption of the multidivisional form by large United States corporations: Institutional, political, and economic accounts. Admin. Sci. Quart. 38(1):100-131.
66. Phillips KW, Loyd DL (2006) When surface and deep-level diversity collide: The effects on dissenting group members. Organ. Behav. Human Decision Processes 99(2):143-160.
67. Ross L, Nisbett RE (1991) The Person and the Situation (McGraw-Hill, New York).
68. Sanders WG, Tuschke A (2007) The adoption of institutionally contested organizational practices: The emergence of stock option pay in Germany. Acad. Management J. 50(1):33-56.
69. Smith KG, Smith KA, Olian JD, Sims HP Jr, O'Bannon DP, Scully JA (1994) Top management team demography and process: The role of social integration and communication. Admin. Sci. Quart. 39(3):412-438.
70. Stern I, Westphal JD (2010) Stealthy footsteps to the boardroom: Executives' backgrounds, sophisticated interpersonal influence behavior, and board appointments. Admin. Sci. Quart. 55(2):278-319.
71. Stewart GL (2006) A meta-analytic review of relationships between team design features and team performance. J. Management 32(1):29-55.
72. Stroebe W, Fraser C (1971) Relationship between riskiness and confidence in choice dilemma decisions. Eur. J. Soc. Psych. 1(4):519-526.
73. Suls J, Green P (2003) Pluralistic ignorance and college student perceptions of gender-specific alcohol norms. Health Psych. 22(5):479-486.
74. Tajfel H, Turner JC (1979) An integrative theory of intergroup conflict. Austin WG, Worchel S, eds. The Social Psychology of Intergroup Relations (Brooks-Cole, Monterey, CA), 33-47.
75. Tanford S, Penrod S (1984) Social influence model: A formal integration of research on majority and minority influence processes. Psych. Bull. 95(2):189-225.
76. Tosi HL, Werner S, Katz JP, Gomez-Mejia LR (2000) How much does performance matter? A meta-analysis of CEO pay studies. J. Management 26(2):301-339.
77. Turner JC (1987) Rediscovering the Social Group: A Self-Categorization Theory (Basil Blackwell, New York).
78. Tversky A, Kahneman D (1974) Judgment under uncertainty: Heuristics and biases. Science 185(4157):1124-1130.
79. Van der Vegt GS, Bunderson JS (2005) Learning and performance in multidisciplinary teams: The importance of collective team identification. Acad. Management J. 48(3):532-547.
80. Vinokur A, Burnstein E (1978) Depolarization of attitudes in groups. J. Personality Soc. Psych. 36(8):872-885.
81. Wade J, O'Reilly CA, Chandratat I (1990) Golden parachutes: CEOs and the exercise of social influence. Admin. Sci. Quart. 35(4):587-603.
82. Wade JB, O'Reilly CA, Pollock TG (2006) Overpaid CEOs and underpaid managers: Fairness and executive compensation. Organ. Sci. 17(5):527-544.
83. Walker TG, Main EC (1973) Choice shifts in political decisionmaking: Federal judges and civil liberties cases. J. Appl. Soc. Psych. 3(1):39-48.
84. Walsh JP (1988) Selectivity and selective perception: An investigation of managers belief structures and information-processing. Acad. Management J. 31(4):873-896.
85. Wasserman N (2006) Stewards, agents, and the founder discount: Executive compensation in new ventures. Acad. Management J. 49(5):960-976.
86. Westphal JD, Bednar MK (2005) Pluralistic ignorance in corporate boards and firms' strategic persistence in response to low firm performance. Admin. Sci. Quart. 50(2):262-298.
87. Westphal JD, Khanna P (2003) Keeping directors in line: Social distancing as a control mechanism in the corporate elite. Admin. Sci. Quart. 48(3):361-398.
88. Westphal JD, Stern I (2006) The other pathway to the boardroom: Interpersonal influence behavior as a substitute for elite credentials and majority status in obtaining board appointments. Admin. Sci. Quart. 51(2):169-204.
89. Westphal JD, Stern I (2007) Flattery will get you everywhere (especially if you are a male Caucasian): How ingratiation, boardroom behavior, and demographic minority status affect additional board appointments at US companies. Acad. Management J. 50(2):267-288.
90. Westphal JD, Zajac EJ (1995) Who shall govern: CEO/board power, demographic similarity, and new director selection. Admin. Sci. Quart. 40(1):60-83.
91. Westphal JD, Seidel MDL, Stewart KJ (2001) Second-order imitation: Uncovering latent effects of board network ties. Admin. Sci. Quart. 46(4):717-747.
92. Whyte G (1993) Escalating commitment in individual and group decision making: A prospect theory approach. Organ. Behav. Human Decision Processes 54(3):430-455.
93. Williams K, O'Reilly C (1998) Demography and diversity in organizations: A review of 40 years of research. Staw BM, Cummings LL, eds. Research in Organizational Behavior, Vol. 20 (JAI Press, Greenwich, CT), 77-140.
94. Wood W, Lundgren S, Ouellette JA, Busceme S, Blackstone T (1994) Minority influence: A meta-analytic review of social influence processes. Psych. Bull. 115(3):323-345.
95. Wooldridge JM (2009) Introductory Econometrics: A Modern Approach, 4th ed. (South-Western Cengage Learning, Mason, OH).
96. Zalesny MD (1990) Rater confidence and social influence in performance appraisals. J. Appl. Psych. 75(3):274-289.
97. Zhu DH, Westphal JD (2011) Misperceiving the beliefs of others: How pluralistic ignorance contributes to the persistence of positive security analyst reactions to the adoption of stock repurchase plans. Organ. Sci. 22(4):869-886.