Tröster, Christian, Niels Van Quaquebeke and Karl Aquino

Worse than others but better than before: Integrating social and temporal comparison perspectives to explain executive turnover via pay standing and pay growth

Human Resource Management, 57 (2): 481-471, (2018).

Copy reference link   DOI: 10.1002/hrm.21876

Abstract: Organizations often pay greater salaries to higher-ranking executives compared to lower-ranking executives. While this method can be useful for retaining those at the organization’s apex, it may also incline executives at the bottom of the pay pyramid to see themselves at a disadvantage and thus exit the firm. Naturally, organizations often want to retain some of their lower-paid, but highly valuable executives; the question, then, is how organizations can reduce the turnover of lower-ranking executives. By integrating social with temporal comparison theory, we argue that, when executives earn relatively less than their peers, more pay growth (i.e., individual pay increases over time) leads to less turnover. By the same token, we also argue that pay growth is unrelated to the turnover of executives who already earn substantially more than their peers. The results of our analysis, which covered almost 20 years of objective data on a large sample of U.S. top executives, provide support for our theory.

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