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Strategic LeadershipTheory and Research on Executives, Top Management Teams, and Boards$
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Bert Cannella, Sydney Finkelstein, and Donald C. Hambrick

Print publication date: 2008

Print ISBN-13: 9780195162073

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780195162073.001.0001

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The Determinants of Executive Compensation

The Determinants of Executive Compensation

(p.291) 10 The Determinants of Executive Compensation
Strategic Leadership

Sydney Finkelstein (Contributor Webpage)

Donald C. Hambrick (Contributor Webpage)

Albert A. Cannella

Oxford University Press

Research on the determinants of executive compensation has a very long tradition in a variety of academic fields. This chapter focuses on the key ideas that emerge from a review of this work, especially in the management literature. Executive pay is generally determined by economic factors, social factors, and political factors, each of which is examined in this chapter. Economic factors include size, performance, human capital, risk, and marginal product. Managerial discretion, discussed in Chapter 2, also plays a big role. Social factors tend to fall into three categories—institutional pressures, social comparison processes, and social capital—each of which suggests alternative predictors of executive compensation. Finally, political factors are very much about power. The chapter concludes with a short section on the compensation of general managers at a business-unit level.

Keywords:   executive compensation, social comparison, marginal product, power, social capital, human capital

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