Deconstructing compensation: The dimensions of executive pay.

摘要

Past research has essentially resulted in equivocal findings regarding the relationships among compensation schemes and executive behavior or firm performance. In response to this problem, I propose that the current operationalization of compensation measures (i.e. pay mix or pay risk) in extant research may be responsible for the inability to find meaningful relationships, as the manner in which these measures are constructed largely ignores their effects on executive's perceptions of wealth. Consequently, I develop a model that distinguishes among the objective dimensions embedded in the compensation contract (implicit risk, horizon length, horizon flexibility, and performance standards) and the perceptual constructs (projected value of compensation, endowed wealth, problem framing, perceptions of control, and wealth orientation) that emerge in response to these dimensions, in order to disentangle the potential incentive properties of various forms of compensation.; I then derive and test hypotheses from this model regarding the manner in which executives actually value, and hence, perceive (frame) future incentive pay and how these perceptions affect executives' wealth orientation. Findings demonstrate general support for the model and suggest that executives' perceptions of and responses to their contingent pay can be dynamic, and that although incentive alignment may initially be achieved via the inclusion of contingent pay in the compensation package, this alignment may not hold constant throughout the compensation horizon. Results also reveal that the sense of control executives' perceive they have over a form of incentive compensation moderates the influence of framing on their wealth orientation. These findings and implications for future research are discussed.