Executive Team Heterogeneity, Pay Gaps And Company Performance

Since the 1980 s,pay gap of top management team(TMT)has increasingly become the focus of practice and academic circles.Academic circles paid attention to relevant studies,and achieved a series of research results.Although the domestic and foreign studies of pay gap influence factors is relatively rich,covering governance factors,environmental factors and other fields,but top management team heterogeneity is not included in the model.Academic circles done a series of studies to explore the relationship between pay gap and firm performance,and reached a basic agreement.However,most studies ignored the regulation of environmental factors.Therefore,this article tried to introduce top management team heterogeneity into the research framework to analyze.First,this paper analyzes the top management team heterogeneity influence on internal executive pay gap.Then,it researches the moderating effect of TMT heterogeneity on the correlation between the pay gap and firm performance.In order to avoid the impact of government intervention such as ‘the salary limit',and study the company's compensation operation model under the market economy with little government intervention,this article selected the private listed companies as samples,and introduced top management team heterogeneity in the research framework to study.The study found that:Firstly,this research shows that TMT heterogeneity of gender,heterogeneity of age and heterogeneity of education levels,has a significantly positive correlation with the pay gap,respectively.The TMT heterogeneity has a positive influence on the pay gap.In the case of TMT heterogeneity,private firms pay more attention to expand the pay gap to compensate for the lack of oversight when considering the design of compensation.Secondly,the pay gap should be designed to be determined by the interactions between the pay-makers and the pay recipients.In reality,the design of the pay gap mainly reflects the intention of pay-makers.When there is large TMT heterogeneity,bounded rationality pay-makers from the perspective of self-interest,designing a large pay gap to make up for lack of oversight.However,the performance is good or bad depends on the effort of the whole team,and the whole team effort depends not only on effective supervision,but also on the response of pay recipients.Thirdly,during the process of the pay gap influencing the firm performance,tournament theory and behavioral theory work together.TMT heterogeneity will affect the suitability of tournament theory and behavioral theory,and finally affect the design of pay gap.Specifically,when there is a large education heterogeneity,behavioral theory play a major role.In this case,the acceptance response of pay recipients to the pay gap is more important than make up for the lack of supervision,and narrow the pay gap can help to improve the level of satisfaction with salary earners,and thus strengthen the working efforts to enhance business performance.When there is a large gender heterogeneity or age heterogeneity,tournament theory may play a major role.At this point,with respect to the acceptance response of pay recipients to the pay gap,to make up for lack of supervision is more important.Expanding the pay gap can make up for lack of oversight and help improve firm performance.