Research shows that top management team (TMT from hereon) members earn as low as 40 percent of the CEO's compensation (Conyon, 2006, p. 28). To add to this, the compensation of CEO is increasing further rapidly than that of non-CEO executives (Useem, 2003). Thus, it becomes necessary to study the compensation of both CEO and TMT and its impact on marketing. CEO pay gap compares the pay of CEO to that of his team and how the difference impacts the firm. Henderson and Fredrickson (2001) studied the impact of CEO pay gap on firm' s capital investment. Siegel and Hambrick (1996) found that large pay gaps impact the collaboration of the firm with others and its subsequent performance. Although scholars suggest that the effects of CEO compensation on firm performance may be indirect through the type of strategic decisions made (Finkelstein and Ham-brick, 1988), limited research examines how the CEO pay gap, in particular, affect intermediate marketing outcomes. The purpose of this study is to address these critical issues by empirically examining the impact of the CEO pay gap on one important intermediate firm outcome—the marketing behavior, specifically advertising and research and development (R&D). The pay gap also has a negative impact of the firm. This study also highlights how the pay gap can impact the product harm crisis in the firm.
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