The Tide that lifts all boats? Acquisitions and CEO-TMT pay disparity in the Netherlands

Purpose The purpose of this paper is to examine how firm growth, and its decomposition into acquisitive and organic growth, can serve as an antecedent to the disparity in pay between the CEO and other top management team (TMT) members. Design/methodology/approach Drawing on tournament theory, the authors argue that acquisitive and organic growth strategies have different effects on CEO-TMT pay disparity. Findings The authors find that acquisitive growth, measured through the number and size of acquisitions, increases CEO-TMT pay disparity while organic growth has no effect on CEO-TMT pay dispa... Mehr ...

Verfasser: Rao Sahib, Padmavathi
van der Laan, Gerwin
van Ees, Hans
Dokumenttyp: Artikel
Erscheinungsdatum: 2018
Reihe/Periodikum: Rao Sahib , P , van der Laan , G & van Ees , H 2018 , ' The Tide that lifts all boats? Acquisitions and CEO-TMT pay disparity in the Netherlands ' , Management Decision , vol. 56 , no. 9 , pp. 2038-2059 . https://doi.org/10.1108/MD-08-2017-0804
Schlagwörter: Organic growth / Acquisitions / Executive compensation / CEO-TMT pay disparity / EXECUTIVE-COMPENSATION / TOP MANAGEMENT / RISK-TAKING / PERFORMANCE / MERGERS / FIRM / INCENTIVES / MARKET / TEAM / BOARD
Sprache: Englisch
Permalink: https://search.fid-benelux.de/Record/base-29191379
Datenquelle: BASE; Originalkatalog
Powered By: BASE
Link(s) : https://hdl.handle.net/11370/704d88df-1b80-44e6-bed0-7a6aa60c91c2

Purpose The purpose of this paper is to examine how firm growth, and its decomposition into acquisitive and organic growth, can serve as an antecedent to the disparity in pay between the CEO and other top management team (TMT) members. Design/methodology/approach Drawing on tournament theory, the authors argue that acquisitive and organic growth strategies have different effects on CEO-TMT pay disparity. Findings The authors find that acquisitive growth, measured through the number and size of acquisitions, increases CEO-TMT pay disparity while organic growth has no effect on CEO-TMT pay disparity. Practical implications The findings, based in the context of the Netherlands, imply that boards in their monitoring activity may need to take into account the potential incentive effects of acquisitive activity as CEOs may have a greater motivation to engage in acquisitions than their fellow TMT members. Originality/value This paper contributes to the literature on relative compensation and incentives and the literature on managerial compensation and firm strategy. To investigate the role of firm growth in increasing CEO-TMT pay disparity, the authors adopt a fine-grained approach along two dimensions. First, the authors disaggregate firm growth into organic and acquisition driven firm growth. Second, the authors disaggregate pay disparity in these components.