Executive Compensation and Employee Remuneration: The Flexible Principles of Justice in Pay
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This paper investigates a series of normative principles that are used to justify different aspects of executive compensation within business firms, as well as the remuneration of lower-ranking employees. We look at how businesses perform pay benchmarking; employees’ engagement, fidelity and loyalty (and their effects on pay practices); and the acceptability of what we call both-ends-dipping, that is, receiving both ex ante and ex post benefits for the same work. We make two observations. First, either different or incoherent principles are used to justify the pay of executives compared to employees, or the same principles are applied differently. Second, these differences or inconsistencies tend to be to the benefit of executives and/or to the detriment of employees. We conclude by asking whether there is any reason for thinking differently about executive pay than we do about employee pay. Our analysis leads us to question the principles justifying current executive compensation and to wonder if these principles are potentially being instrumentalized to serve other ends.
KeywordsPay justice Executive compensation Employee remuneration
The authors would like to acknowledge financial support from the Stephen A. Jarislowsky Chair in Corporate Governance, the Institute for the Governance of Private and Public Organizations, and the Mitacs Accelerate program.
Compliance with Ethical Standards
This article does not contain any studies with human participants or animals performed by any of the authors.
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