Skip to main content
SpringerLink
Log in

A Model Capturing Ethics and Executive Compensation

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

This article develops and applies a knowledge-based framework for understanding and interpreting executive compensation under the rubric of ethical consideration. This framework classifies six major ethical considerations that reflect issues in compensation design. We emphasize that these six ethical considerations are influenced by liberty and equality concepts. This framework helps to highlight areas where executive compensation has not been well spelled out.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

References

  • Albert, M.: 1993, Capitalism vs. Capitalism: How America's Obsession with Individual Achievement and Short-term Profit has Led it to the Brink of Collapse. Four Walls Eight Windows.

  • Appold, S. J., S. Siengthai and J. D. Kasarda: 1998, 'The Employment of Women Managers and Professionals in an Emerging Economy: Gender Inequality as an Organizational Practice', Administrative Science Quarterly 42, 103-129.

    Google Scholar 

  • Aristotle: 1984, Complete Works of Aristotle. Edited by J. Barnes (Princeton University Press, Princeton).

    Google Scholar 

  • Barkema, H. G. and L. R. Gomez-Mejia: 1998, 'Managerial Compensation and Firm Performance. A General Research Framework', Academy of Management Journal 41(2), 135-145.

    Google Scholar 

  • Barney, J.: 2001, 'Is the Resource-based “View” a Useful Perspective for Strategic Management Research? Yes', Academy of Management Review 25, 41-56.

    Google Scholar 

  • Bouma, J. J. and N. Kamp-Roelands: 2000, 'Stakeholders' Expectation of an Environmental Management System: Some Exploratory Research', The European Accounting Review 9, 131-144.

    Google Scholar 

  • Bowie, N.: 1991, 'Challenging the Egoistic Paradigm. Business Ethics Quarterly 1, 1-21.

    Google Scholar 

  • Byrne, J. A.: 2002a, 'Restoring Trust in Corporate America: Business Must Lead the Way to Real Reform', Business Week (June 24), 31-35.

  • Byrne, J. A.: 2002b, 'Fall from Grace', Business Week (August 12), 51-56.

  • Conyon, M. J. and S. I. Peck: 1998, 'Board Control, Remuneration Committees and Top Management Compensation', Academy of Management Journal 41, 146-157.

    Google Scholar 

  • Cook, S. D. and J. S. Brown: 1999, 'Bridging Epistemologies: The Generative Dance between Organizational Knowledge and Organizational Knowing', Organization Science 10, 381-400.

    Google Scholar 

  • Culbertson, A. L. and W. Rodgers: 1997, 'Improving Managerial Effectiveness in the Workplace: The A Model Capturing Ethics and Executive Compensation 199 Case of Sexual Harassment of Navy Women', Journal of Applied Social Psychology 27, 1953-1971.

    Google Scholar 

  • Davenport, T. H. and L. Prusak: 1998, Working Knowledge: How Organizations Manage What They Know (Harvard Business School, Boston MA).

    Google Scholar 

  • David, P., R. Kochar and E. Levitas: 1998, 'The Effect of Institutional Investors on the Level and Mix of CEO Compensation', Academy of Management Journal 41, 200-208.

    Google Scholar 

  • Deckop, J. R., R. Mangel and C. C. Cirka: 1999, 'Getting More than You Pay For: Organizational Citizenship Behavior and Pay-for-performance Plans', Academy of Management Journal 42, 420-428.

    Google Scholar 

  • Dejong, D., R. Forsythe and J. Lundholm: 1985, 'Ripoffs, Lemons, and Reputation Formation in Agency Relationships: A Laboratory Market Study', The Journal of Finance 40, 809-820.

    Google Scholar 

  • Ezzamel, M. and R. Watson: 1998, 'Market Comparison and the Bidding-up of Executive Cash Compensation: Evidence from the United Kingdom', Academy of Management Journal 41, 221-231.

    Google Scholar 

  • Finkelstein. S. and B. Boyd: 1998, 'How Much Does the CEO Matter? The Role of Managerial Discretion in the Setting of CEO Compensation', Academy of Management Journal 41, 179-199.

    Google Scholar 

  • Foss, N. J.: 1996, 'Knowledge-based Approaches to the Theory of the Firm: Some Critical Comments', Organization Science 7, 470-476.

    Google Scholar 

  • Freeman, R. E.: 1984, Strategic Management: A Stakeholder Approach (Pitman Publishing, Boston).

    Google Scholar 

  • Friedman, M.: 1970, 'Social Responsibility of Business is to Increase its Profits', New York Times Magazine (September 13), 122-126.

  • Fudenberg, D. and D. Levine: 1989, 'Reputation and Equilibrium Selection in Games with a Patient Player', Econometrica 57(4), 759-778.

    Google Scholar 

  • Garen, J. E.: 1994, 'Executive Compensation and Principal-agent Theory', Journal of Political Economy 102, 1175-1199.

    Google Scholar 

  • Gomez-Mejia, L. and R. M. Wiseman: 1997, 'Reframing Executive Compensation: An Assessment and Outlook', Journal of Management 23, 291-374.

    Google Scholar 

  • Graves, S. and S. Waddock: 1994, 'Institutional Owners and Corporate Social Performance. Academy of Management Journal 37, 1034-1046.

    Google Scholar 

  • Harris D. and C. Helfat: 1997, 'Specificity of CEO, Human Capital, and Compensation', Strategic Management Journal 18, 895-920.

    Google Scholar 

  • Harris, H. and A. Raviv: 1978, 'Some Results on Incentive Contracts with Applications to Education and Employment, Health Insurance, and Law Enforcements', The American Economic Review 68, 20-30.

    Google Scholar 

  • Harris, H. and A. Raviv: 1979, 'Optimal Incentive Contracts with Imperfect Information', Journal of Economic Theory, 20, 231-259.

    Google Scholar 

  • Hayward, M. L. and D. C. Hambrick: 1997, 'Explaining the Premiums Paid for Large Acquisitions: Evidence of CEO Hubris', Administrative Science Quarterly 42, 103-127.

    Google Scholar 

  • Helfat, C. E. and R. S. Raubitschek: 2000, 'Product Sequencing: Co-evolution of Knowledge, Capabilities and Products', Strategic Management Journal 21, 961-979.

    Google Scholar 

  • Herremans, I. M., P. Akathapron and M. McInnes: 1993, 'An Investigation of Corporate Social Responsibility Reputation and Economic Performance', Accounting, Organizations and Society 18, 587-604.

    Google Scholar 

  • Hollensbe, E. C. and J. P. Guthrie: 2000, 'Group Pay-for-performance Plans: The Role of Spontaneous Goal Setting', Academy of Management Review 25, 854-872.

    Google Scholar 

  • Holmstrom, B.: 1979, 'Moral Hazard and Observability', The Bell Journal of Economics, 74-91.

  • Holmstrom, B. and J. Ricart: 1986, 'Managerial Incentives and Capital Management', The Quarterly Journal of Economics (November), 835-860.

  • Jensen, M. C. and K. J. Murphy: 1990, 'Performance Pay and Top Management Incentives', Journal of Political Economy 98, 225-264.

    Google Scholar 

  • Johnson, R. D. and D. W. Greening: 1999, 'The Effects of Corporate Governance and Institutional Ownership Types on Corporate Social Performance', Academy of Management Journal 42, 564-576.

    Google Scholar 

  • Kanodia, C., R. Bushman and J. Dickhaut: 1989, 'Escalation Errors and the Sunk Cost Effect: An Explanation Based on Reputation and Information Asymmetries', Journal of Accounting Research 27, 59-77.

    Google Scholar 

  • Kirchmeyer, C.: 2002, 'Gender Differences in Managerial Careers: Yesterday, Today, and Tomorrow', Journal of Business Ethics 37, 5-24.

    Google Scholar 

  • Kristof, K. M.: 2002a, 'CEOs Paid 70% More at Firms Under Scrutiny', Los Angeles Times (August 26), C3.

  • Kristof, K. M.: 2002b, 'SEC Tightens its Deadlines for Disclosure', Los Angeles Times (September 18), C1.

  • Lepine, J. A. and L. Van Dyne: 2001, 'Peer Responses 200 Waymond Rodgers and Susana Gago to Low Performers: An Attributional Model of Helping in the Context of Groups', Academy of Management Review, 25, 67-84.

    Google Scholar 

  • Mendelson, H.: 1985, 'Discussion', The Journal of Finance 40, 809-820.

    Google Scholar 

  • Milgrom, P. and J. Roberts: 1988, 'Economics Theories of the Firm: Past, Present and Future', Canadian Journal of Economics 21, 444-458.

    Google Scholar 

  • Mitchell, L. E.: 2001, Corporate Irresponsibility: America's Newest Export (Yale University Press, New Haven, CT).

    Google Scholar 

  • Odgen, S. and R. Watson: 1999, 'Corporate Performance Management: Balancing Shareholder and Customer Interests in the U.K. Privatized Water Industry', Academy of Management Journal 42, 526-538.

    Google Scholar 

  • Pareto, W.: 1967, Sommaire du Cours de Sociologie (Libraire Droz, Géneve).

    Google Scholar 

  • Pitcher, P. and A. D. Smith: 2001, 'Top Management Team Heterogeneity: Personality, Power and Proxies', Organization Science 12, 1-18.

    Google Scholar 

  • Plato: 1997, Plato Complete Works. Edited by J. M. Cooper and D. S. Hutchinson (Hackett Pub Co.).

  • Porac, J. F., J. B. Wade and T. G. Pollock: 1999, 'Industry Categories and the Politics of the Comparable Firm in CEO Compensation', Administrative Science Quarterly 44, 112-144.

    Google Scholar 

  • Postrel, S.: 2002, 'Islands of Shared Knowledge: Specialization and Mutual Understanding in Problem-solving Teams', Organization Science 13, 303-320.

    Google Scholar 

  • Rajagopalan, N. and D. K. Datta: 1996, 'CEO Characteristics: Does Industry Matter?', Academy of Management Journal 39, 197-215.

    Google Scholar 

  • Rodgers, W.: 1991, 'How Do Loan Officers Make their Decisions about Credit Risks? A Study of Parallel Distributed Processing (PDP)', Journal of Economic Psychology 12, 243-265.

    Google Scholar 

  • Rodgers, W.: 1992, 'The Effects of Accounting Information on Individuals' Perceptual Processes', Journal of Accounting, Auditing and Finance 7, 67-96.

    Google Scholar 

  • Rodgers, W.: 1997, Throughput Modeling: Financial Information Used by Decision Makers (JAI Press, Greenwich, CT).

    Google Scholar 

  • Rodgers, W:. 2002, 'Measurement and Reporting of Knowledge-based Assets', Journal of Intellectual Capital (forthcoming).

  • Rodgers W. and S. Gago: 2001, 'Cultural and Ethical Effects on Managerial Decisions: Examined in a Throughput Model', Journal of Business Ethics 31, 355-367.

    Google Scholar 

  • Sanders, W. G. and M. A. Carpenter: 1998, 'Internationalization and Firm Governance: The Roles of CEO Compensation, Top Team Composition, and Board Structure', Academy of Management Journal 41, 158-178.

    Google Scholar 

  • Seidel, M. L., J. T. Polzer and K. J. Stewart: 2000, 'Friends in High Places: The Effects of Social Networks on Discrimination in Salary Negotiations', Administrative Science Quarterly 45, 1-24.

    Google Scholar 

  • Shavell, S.: 1987, 'Riesgo compartido e incentivos en la relación principal-agente', Cuadernos Económicos del ICE 2, 107-126.

    Google Scholar 

  • Singer, M.: 1997, Ethics and Justice in Organizations (Ashgate, Sydney).

    Google Scholar 

  • Smidts, A., A. Pruyn and C. B. van Riel: 2001, 'The Impact of Employee Communication and Perceived External Prestige on Organizational Identification', Academy of Management Journal 49, 1051-1062.

    Google Scholar 

  • Stajkovic, A. D. and F. Luthand: 2001, 'Differential Effects of Incentive Motivators on Work Performance', Academy of Management Journal 4, 580-590.

    Google Scholar 

  • Strauss, G.: 2002, 'CEOs' Fat Checks Belie Troubled Times', USA Today (September 30), B1-B2.

  • Teece, D. J., G. Pisano and A. Shuen: 1997, 'Dynamic Capabilities and Strategic Management', Strategic Management Journal 18, 509-534.

    Google Scholar 

  • Tosi, H. L., J. Katz and L. R. Gomez-Mejia 1997, 'Disaggregating the Agency Contract: The Effects of Monitoring, Incentive Alignment and Term in Office on Agent Decision-making', Academy of Management Journal 40, 584-602.

    Google Scholar 

  • Tversky, A. and D. Kahneman: 1974, 'Judgment under Uncertainty: Heuristics and Biases', Science 185, 1124-1131.

    Google Scholar 

  • Useem, M.: 1984, The Inner Circle (Oxford University Press, New York). Verrier, R.: 2002, 'Vivendi Faces Probe by French Regulators', Los Angeles Times (July 10), C1, C11.

    Google Scholar 

  • Waldman, D. and F. Yammarino: 1999, 'CEO Charismatic Leadership: Levels-of-management and Levels-of-analysis Effects', Academy of Management Review 24, 266-285.

    Google Scholar 

  • Weaver, G. R., L. K. Treviño and P. Cochran: 1999, 'Integrated and Decoupled Corporate Social Performance: Management Commitments, External Pressures and Corporate Ethics Practice', Academy of Management Journal 42, 539-552.

    Google Scholar 

  • Wernerfelt, B.: 1984, 'A Resource-based View of the Firm', Strategic Management Journal 5, 171-180.

    Google Scholar 

  • Westphal, J. D. and L. P. Milton: 2000, 'How Experience and Network Ties Affect the Influence of Demographic Minorities on Corporate Boards', Administrative Science Quarterly 45, 366-398.

    Google Scholar 

  • Westphal, J. D. and E. J. Zajac: 1997, 'Detections from the Inner Circle: Social Exchange, Reciprocity, and the Diffusion of Board Independence in U.S. Companies', Administrative Science Quarterly 42, 161-183.

    Google Scholar 

  • Zajac, E. J. and J. D. Westphal: 1996, 'Director Reputation, CEO-board Power, and the Dynamics of Board Interlocks', Administrative Science Quarterly 41, 507-529.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Graduate School of Management, University of California, Riverside, CA, 92521, U.S.A.

    Waymond Rodgers

  2. Social and Law Sciences School, Carlos III University of Getafe (Madrid), Spain

    Susana Gago

  3. University of Santiago de Compostela, Spain

    Susana Gago

Authors
  1. Waymond Rodgers
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Susana Gago
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Rodgers, W., Gago, S. A Model Capturing Ethics and Executive Compensation. Journal of Business Ethics 48, 189–202 (2003). https://doi.org/10.1023/B:BUSI.0000004589.34756.8a

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/B:BUSI.0000004589.34756.8a

Keywords

Search

Navigation