Payoffs for layoffs? An examination of CEO relative pay and firm performance surrounding layoff announcements

In this study, we theorize that chief executive officers’ (CEOs’) peer pay comparisons influence their decisions to engage in layoffs, and we consider the conditions under which layoffs deliver “payoffs” in the form of increases in subsequent CEO relative pay. Our results indicate that CEOs receiving compensation below their peers are significantly more likely to announce layoffs in the subsequent year, relative to those receiving compensation above their peers. Further, we find that the relationship between layoffs and subsequent changes in CEO relative pay depends on postlayoff changes in firm performance, with CEOs in firms with the largest performance gains receiving the largest increases in relative pay. We also show that our results are robust to an alternative operationalization of CEO relative pay. We provide evidence that external social comparisons may have predictable consequences for both CEOs’ propensities to engage in particular strategic actions and future changes in CEOs’ relative pay.     

Individual and organizational consequences of CEO claimed handicapping: What’s good for the CEO may not be so good for the firm

Previous research on organizational impression management has focused on verbal accounts proffered by leaders in response to organizational-threatening events. The present studies examined the effectiveness of an anticipatory verbal tactic, claimed handicapping, in which CEOs warn stakeholders of factors that may adversely affect future firm performance. We studied the effect of two types of claimed handicapping on CEO compensation and firm value. One claimed handicap consisted of factors external to the firm whereas the other claimed handicap consisted of factors internal to the firm. In two very different research venues (an experiment and archival study), we found that, under certain conditions, claimed external handicapping had diametrically opposed effects on CEO compensation and firm value. Specifically, when prior firm performance was favorable, external claimed handicaps had a positive effect on CEO pay but a negative impact on firm value. Moreover, the results of both studies highlighted the need to distinguish between external claimed handicaps and internal claimed handicaps, in that all significant effects were produced by external rather than internal claimed handicaps. Contributions to theory and research on organization impression management, self-handicapping, and executive compensation, as well as cross-disciplinary implications, are discussed.     

CEO Servant Leadership: Exploring Executive Characteristics and Firm Performance

This study offers an examination of the relationships between chief executive officer (CEO) servant leadership, the executive characteristics of narcissism, founder status, and organizational identification, and firm performance in a sample of 126 CEOs in technology organizations. Analysis of data gathered over multiple periods revealed a negative relationship between CEO narcissism and servant leadership, and a positive relationship between founder status (i.e., founder or nonfounder) and servant leadership. Furthermore, CEO organizational identification served as a partial mediating mechanism linking narcissism and founder status to servant leadership. In turn, CEO servant leadership predicted subsequent firm performance (measured as return on assets). The results of this study have implications for researchers interested in better understanding the predictors and consequences of servant leadership and for practitioners concerned with combating negative or selfish executive leadership behaviors and employing servant leadership for the organization's benefit.     

The impact of transformational CEOs on the performance of small- to medium-sized firms: does organizational context matter?

Although theory suggests that CEOs who engage in transformational leadership should have a positive effect on firm performance, most empirical examinations using data drawn from larger firms have failed to find support for this linkage. Given that the organizational complexity associated with larger firms has been viewed as a central obstacle to establishing this important link, the authors examined the impact of CEO transformational leadership on firm performance in smaller, privately held firms. After first explaining why the less complex context of these firms provides a setting for transformational CEOs to play a more direct role in enhancing firm performance, they then further clarified the nature of this link by hypothesizing 3 contingencies that they argued are particularly salient: firm size, CEO founder status (founder or nonfounder), and CEO tenure. Results from a multisource survey of CEOs and their top management teams in 121 firms and 2 time-lagged measures of performance, 1 objective and 1 perceived, provided consistent support for these hypotheses.     

Top executive pay and firm performance

A study examining longitudinal data obtained from theDisclosure database for 390 large American firms yielded complex and unclear patterns of correlations between firm performance and executive pay. An examination of the data indicates that the relationship between firm performance and executive compensation may be nonlinear. Among performance measures, total assets was found to have the strongest association with executive pay. It was concluded that the scale of discretionary resources available to the firm better predicts executive pay than profitability or efficiency ratios.     

Do CEOs Matter to Firm Strategic Actions and Firm Performance? A Meta‐Analytic Investigation Based on Upper Echelons Theory

What roles do CEOs play in firm performance? To address this question, the management field has accumulated a substantial amount of research over the past 3 decades built on upper echelons theory (UET), which posits that CEO characteristics manifest in firm strategic actions and, in this way, future firm performance. Hence, there is a need to systematically amass and take stock of prior empirical findings for UET testing and development. We use meta‐analytic techniques to synthesize prior UET research on the relationships among commonly studied CEO characteristics, firm strategic actions, and future firm performance. Based on 308 studies, meta‐analytic results generally support UET's predictions with a few exceptions: CEO characteristics (i.e., tenure, formal education, prior career experience, and positive self‐concept) are significantly associated with firm strategic actions, which in turn are significantly related to future firm performance. Moreover, CEO characteristics (i.e., age, tenure, formal education, and prior career experience) are positively related to future firm performance. In addition, fine‐grained analyses have revealed interesting and important relationships between specific measures of CEO characteristics (e.g., CEO prior task experience) and firm outcomes (e.g., firm strategic actions that match with CEO prior task experience). Implications for theory, future research, and practice are discussed.     

Organizational performance referents: An empirical examination of their content and influences

Although the mechanisms by which individuals make judgments about personal success have been studied extensively, theoretical and empirical development of performance referents in organizations has been sparse. To address this shortfall, we utilized a two-study design to explore performance referents used by CEOs along with characteristics influencing referent orientation (internal vs. external). Referent use was identified through content analysis of 119 CEO annual shareholder letters in the restaurant industry. Results suggest that CEOs use a wide variety of primarily internal referents to assess performance. CEOs who integrate external referents into their performance sensemaking efforts tend to be from larger and more highly performing organizations. Post hoc analysis revealed that CEOs of larger and younger organizations used a higher percentage of external referents.     

The impact of chief executive officer personality on top management team dynamics:one mechanism by which leadership affects organizational performance

This article explores 1 mechanism by which leader personality affects organizational performance. The authors hypothesized and tested the effects of leader personality on the group dynamics of the top management team (TMT) and of TMT dynamics on organizational performance. To test their hypotheses, the authors used the group dynamics q-sort method, which is designed to permit rigorous, quantitative comparisons of data derived from qualitative sources. Results from independent observations of chief executive officer (CEO) personality and TMT dynamics for 17 CEOs supported the authors' hypothesized relationships both between CEO personality and TMT group dynamics and between TMT dynamics and organizational performance.     

薪酬水平和薪酬差距对企业运营结果影响的元分析

以国内外113篇企业薪酬水平和薪酬差距领域的实证研究(254个效应值, 438880家企业)为样本, 采用基于结构方程模型的元分析方法检验了企业平均薪酬水平、垂直薪酬差距和水平薪酬差距对企业创新、绩效和离职等运营结果的影响。元分析结果显示, 平均薪酬水平不仅能够显著提升企业的创新和绩效水平, 也会抑制企业内部的离职水平; 垂直和水平薪酬差距对企业绩效的主效应并不显著, 但其对企业创新具有显著的抑制作用, 并能够显著提升企业的离职水平。进一步的调节效应检验表明, 国家地域因素调节了薪酬水平与企业绩效之间的关系, 即中国企业的平均薪酬水平对企业绩效的促进作用显著高于美国企业。研究结果对于企业的薪酬管理具有一定的借鉴意义。     

Executive turnover: the influence of dispersion and other pay system characteristics

Using tournament theory as a guiding theoretical framework, in this study, we assess the organizational implications of pay dispersion and other pay system characteristics on the likelihood of turnover among individual executives in organizational teams. Specifically, we estimate the effect of these pay system characteristics on executive turnover decisions. We use a multi-industry, multilevel data set composed of executives in publicly held firms to assess the effects of pay dispersion at the individual level. Consistent with previous findings, we find that pay dispersion is associated with an increased likelihood of executive turnover. In addition, we find that other pay characteristics also affect turnover, both directly and through a moderating effect on pay dispersion. Turnover is more likely when executives receive lower portions of overall top management team compensation and when they have more pay at risk. These conditions also moderate the relationship between pay dispersion and individual turnover decisions, as does receiving lower compensation relative to the market.     

Profile of the American CEO: Comparing Inc. and fortune executives

Given the documented differences between entrepreneurial and traditional organizations in their structure and climate, a well as the predicted escalation of competition in global markets in the upcoming decade, the present study focused on the following questions. First, do chief executive officers (CEOs) from different corporate environments differ in the attributes, skills, and abilities they possess, and second, what meaning do these differences have for CEOs in confronting immediate and future challenges in small growth companies and large corporations. A sample of 35Fortune 500 CEOs and 35Inc. 500 CEOs was assessed on the London House STEP battery in order to identify differences between these groups. It was hypothesized that although there would be some overlap, the pattern of strengths and weaknesses would differ between the CEO groups. Specifically, it was expected thatInc. CEOs would be more creative whileFortune CEOs would exhibit a better balance in their breadth of managerial and executive skills. Results showed that these hypotheses were confirmed. Both groups were, not surprisingly, high in their potential for success and were not significantly different from one another in this overall dimension. However,Inc. CEOs were significantly higher in creativity, ability to work under pressure, and developing technical ideas, whileFortune CEOs excelled in the interpersonal skills of communications, developing teamwork, supervisory practices, developing employee potential and in the areas of leadership experience and financial responsibility. Findings are discussed in terms of developmental and strategic suggestions for current and aspiring CEOs.Paper presented at the Annual Conference of the Academy of Management, Washington, D.C., August, 1989.     

AN EMPIRICAL INVESTIGATION OF THE PREDICTORS OF EXECUTIVE CAREER SUCCESS

This study examined the degree to which demographic, human capital, motivational, organizational, and industrylregion variables predicted executive career success. Career success was assumed to comprise objective (pay, ascendancy) and subjective (job satisfaction, career satisfaction) elements. Results obtained from a sample of 1,388 U.S. executives suggested that demographic, human capital, motivational, and organizational variables explained significant variance in objective career success and in career satisfaction. Particularly interesting were findings that educational level, quality, prestige, and degree type all predicted financial success. In contrast, only the motivational and organizational variables explained significant amounts of variance in job satisfaction. These findings suggest that the variables that lead to objective career success often are quite different from those that lead to subjectively defined success.     

She’s Got the Look: Inferences from Female Chief Executive Officers’ Faces Predict their Success

Inferences from faces can predict success. This may be particularly important for women, who are often evaluated by their appearance. Here 170 northeastern U.S. undergraduates judged personality traits or leadership ability from the faces of all 20 U.S. Fortune 1,000: 2006 female chief executive officers (CEOs) and we compared these ratings to the same trait ratings made for male CEOs in a previous study. After controlling for cues important for female leaders (attractiveness, affect, age, and masculinity/femininity), ratings of competence and leadership predicted the amount of profits that the CEOs’ companies made and ratings of dominance predicted the amount of individual compensation that the CEOs received. CEOs’ success is therefore related to their facial appearance regardless of target and perceiver gender.     

Employee Stock Options: Are They Indeed Superior to Other Incentive Compensation Schemes?

Although employee stock options are gaining in popularity as a compensation plan aimed at improving work performance, there is neither theoretical nor empirical evidence that they are indeed superior to other incentive schemes, such as profit sharing and gain sharing. This paper examines, from a theoretical perspective, the possible effects of four incentive plans on employee motivation and performance: merit pay, profit sharing, gain sharing, and employee stock options. The analysis relies on two behavioral theories, Expectancy and Equity, and a conceptual financial framework. The different approaches yield incongruent predictions as to which of the four schemes can be expected to most enhance employee motivation. While the managerial theories favor stock options over profit or gain sharing, financial theory makes the case that all plans are identical in a competitive labor market, whereas if stock options are restricted and the labor market exhibits some degree of imperfection, gain and profit sharing plans may prove superior.     

The Teddy-Bear Effect: Does Having a Baby Face Benefit Black Chief Executive Officers?

ABSTRACT— Prior research suggests that having a baby face is negatively correlated with success among White males in high positions of leadership. However, we explored the positive role of such "babyfaceness" in the success of high-ranking Black executives. Two studies revealed that Black chief executive officers (CEOs) were significantly more baby-faced than White CEOs. Black CEOs were also judged as being warmer than White CEOs, even though ordinary Blacks were rated categorically as being less warm than ordinary Whites. In addition, baby-faced Black CEOs tended to lead more prestigious corporations and earned higher salaries than mature-faced Black CEOs; these patterns did not emerge for White CEOs. Taken together, these findings suggest that babyfaceness is a disarming mechanism that facilitates the success of Black leaders by attenuating stereotypical perceptions that Blacks are threatening. Theoretical and practical implications for research on race, gender, and leadership are discussed.     

CEO变革型领导行为对中层管理者工作绩效和工作满意度的影响：组织支持知觉和价值观的作用

本文以社会交换的理论和价值观领导理论为基础,探讨了CEO变革型领导行为及其价值观对中层管理者工作绩效和工作满意度的跨层次影响以及影响的中介作用机制。研究结果表明,CEO变革型领导行为有助于提升中层管理者的工作绩效和工作满意度,而组织支持知觉则在其中起着部分中介的作用。同时,CEO价值观对CEO变革型领导行为与组织支持知觉之间的关系具有调节的作用。本文的研究成果有利于进一步完善变革型领导理论,对企业实践也有一定的启示意义。     

The Relationship Between Employees’ Objective Internal and External Pay Standing and Their Job Performance: A Within-Person Analysis

Purpose

Researchers have paid little attention to the relationship between employees’ objective internal and external pay standing and their job performance. Moreover, few studies have considered that employees’ objective pay standing is dynamic; that is, it changes over time. In this study, we analyze the relationship between changes in employees’ objective internal and external pay standing and their job performance.

Design/Methodology/Approach

We test the hypotheses using data for players in the National Basketball Association over a period of 12 seasons (n = 4830).

Findings

Decreases in employees’ objective internal and external pay standing are negatively related to their task performance. Furthermore, decreases in employees’ objective internal pay standing, but not in their external pay standing, are negatively related to their contextual performance.

Implications

Analyzing the relationship between changes in employees’ objective internal and external pay standing and their job performance adds to our understanding of the individual-level consequences of pay dispersion.

Originality/Value

This is one of the first studies to analyze the relationship between employees’ objective internal and external pay standing and their job performance. Moreover, this is one of the first studies that considers that employees’ objective internal and external pay standing changes, for example, because the external and internal labor markets change. The study contributes to research on employee compensation and salary, and to research on pay disparities.

     

Leadership and Organizational Culture: Linking CEO Characteristics to Cultural Values

Purpose  The purpose of this study was to empirically examine organizational culture theorists’ assertions about the linkages between leadership and the cultures that emerge in the organizations they lead. Specific hypotheses were developed and tested regarding relationships between chief executive officers’ (CEO’s) personality traits, and the cultural values that are shared among their organization’s members. Design/Methodology/Approach  Thirty-two CEOs completed measures of the Big-Five personality traits and personal values. A total of 467 employees across the 32 organizations completed a competing values measure of organizational culture. Findings  Results indicate support for several hypothesized relationships between CEO personality and cultural values. Exploratory analyses indicated that several CEO personal values were related to culture values. Implications  Organizations need to seriously consider the “fit” between the current or desired organizational culture and CEO characteristics. Organizations attempting to change fundamental aspects of its functioning may need significant behavioral—or personnel—changes at the top of the organization in order to achieve those changes. Originality/Value  This is the first empirical study to establish a link between specific CEO characteristics and the cultural values of their organizations. This study provides evidence that CEO characteristics are felt throughout the organization by impacting the norms that sanction or discourage member behavior and decision making, and the patterns of behavior and interaction among members.     

CONTINGENCIES IN THE EFFECTS OF PAY RANGE ON ORGANIZATIONAL EFFECTIVENESS

The degree of pay spread can influence many organizational level outcomes (e.g., workforce productivity and organizational performance), but empirical studies are inconsistent about the directionality of the effect. We argue that it is not simply the width of the pay range but also the factors responsible for the width that explain the effects of the pay range on employee and organizational outcomes. We expect that when wider pay ranges are attributable to the use of performance-based pay, the effects of the pay range on performance are positive, but narrower pay ranges attributable to performance-based pay reduce this effect substantially. By contrast, wider pay ranges attributable to politically based pay should have negative effects on performance, and this effect should be weakened when the pay ranges are narrower. Data from a sample of motor carriers generally support our predictions. Although wider pay ranges have positive effects, the results reveal a complex pattern of relationships among the basis of pay allocations and pay range width on the one hand and workforce productivity and organizational performance on the other. Implications for future compensation and strategic human resource management research are discussed.     

Hidden in Plain Sight: The Active Ingredients of Executive Coaching

We propose that I/O psychologists who coach executives have overlooked psychotherapy outcome research as a source of information and ideas that can be used to improve our executive coaching practices. This research, based on thousands of studies and many meta-analyses, has converged on the conclusion that four "active ingredients" account for most of the variance in psychotherapy outcomes. We describe how this literature has identified four primary "active ingredients" that account for most of the variance in psychotherapy outcomes: 1) Client/extratherapeutic factors (40%), 2) The relationship or alliance (30%), 3) Placebo or hope (15%), and 4) Theory and technique (15%). Working on the assumption that psychotherapy and executive coaching are sufficiently similar to justify generalization from one domain to the other, we describe these four active ingredients at length and explore how they may be at work in the executive coaching process. We also suggest that I/O psychologists have training and experience that allows us to leverage some of these active ingredients in our executive coaching (e.g., understanding of client individual differences related to coaching outcomes). But we also have areas of weakness (e.g., building a strong working relationship with an individual client) that may need to be bolstered with additional training and development experiences.