Pay equity in CEO compensation and agency problems: Socio-psychological agency theory framework.

摘要

In this dissertation, I develop a socio-psychological framework of agency theory to examine the motivational effectiveness of CEOs' compensation contracts. I aim specifically to address the question: Under what conditions will the compensation package trigger CEO self-serving behaviors? Emphasizing the fact that CEOs are employees who face both opportunities and disciplines in the labor market, I integrate agency theory with equity theory to examine the effectiveness of the CEO compensation contract in the larger context of the managerial labor market. My theory focuses on "equitable pay level" as a standard threshold below which the compensation contract contributes to the generation of agency problems by motivating CEOs to engage in seemingly self-serving equity-restoration behaviors.;I examine whether relatively underpaid CEOs, to increase their pay levels, are more likely (1) to exercise greater influence over boards' compensation decision processes or (2) to pursue more acquisitions or diversification that give rise to increases in firm size. I also examine whether relatively underpaid CEOs are more likely (3) to leave the firm or (4) to try to build more social capital to promote their outside employability. I further examine the effects that CEO power has on underpaid CEOs' choice of behavioral reactions. Next, I extend my socio-psychological agency framework to examine whether shareholder bargaining power has an effect on CEO external underpayment per se and on externally underpaid CEOs' reactions to pay inequity.;My dissertation contributes to the extant corporate governance research by examining the role that CEO pay equity plays in the generation of agency problems. My theory presents a more realistic picture of corporate governance issues concerning CEO compensation by accounting for CEOs' psychological processes. Using longitudinal, panel data that consist of variables for the S&P large-, medium-, and small-cap manufacturing firms in the United States, I provide evidence that relatively underpaid CEOs react to pay inequity in various ways and that these behavioral reactions, aimed at equity restoration, contribute to the generation of agency problems.