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Normative Myopia, Executives’ Personality, and Preference for Pay Dispersion: Implications for Corporate Social Performance

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Toward Integrative Corporate Citizenship

Abstract

For a number of years, there has been a trend toward ever-increasing salary differentials in business organizations. While pay for the lowest-earning workers decreased between 1960 and 1990, compensation for top managers increased greatly (Feenstra & Hanson, 1996; Juhn, Murphy & Pierce, 1993; Mishel, Bernstein & Schmitt, 1996). However, these pay disparities may not be warranted by companies’ performance records (Colvin, Harrington & Hjelt, 2001; Craig, 2003; Loomis, 2001; Useem & Florian, 2003). Moreover, some corporate governance structures have apparently allowed executives to receive extremely large pay packages in the form of stock options even while investors suffered losses (Fox, 2002). This has prompted Fortune, a pro-business magazine, to call current executive pay practices ‘over-the-top CEO piggishness’(Fox, 2002, p. 70) and ‘outrageous,’ ‘madness,’ or ‘grossly high — astronomical’ (Colvin, Harrington & Hjelt, 2001, p. 64). Even Professor Michael Jensen, an advocate of high executive pay, has professed: ‘I’ve generally worried these guys weren’t getting paid enough […]. But now even I’m troubled’ (Colvin, Harrington & Hjelt, 2001, p. 64).

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Authors and Affiliations

  1. Pennsylvania State University Altoona, USA

    Marc Orlitzky (Associate Professor of Management)

  2. Kansas State University, USA

    Diane L. Swanson (Professor of Management)

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Orlitzky, M., Swanson, D.L. (2008). Normative Myopia, Executives’ Personality, and Preference for Pay Dispersion: Implications for Corporate Social Performance. In: Toward Integrative Corporate Citizenship. Palgrave Macmillan, London. https://doi.org/10.1057/9780230594708_10

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