Global perspectives on top management team pay structures

Purpose The purpose of this paper is to investigate the relation between countries’ values of individualism/collectivism and organizations’ top management team (TMT) pay structures. Individualistic countries are expected to prefer more hierarchical TMT pay structures and collectivist countries are expected to prefer more egalitarian TMT pay structures. The manuscript also investigates the international implications of the relation between TMT pay structures and organizational performance. Specifically, it is proposed that a country’s level of individualism/collectivism will mediate the relation between TMT pay structure hierarchy and organizational performance. Design/methodology/approach A pooled sample of data from 56 organizations in 12 countries was used to investigate the research questions. Individualism/collectivism was measured using country specific individualism/collectivism scores and top management pay structures were operationalized using Gini coefficients. Organizational performance was evaluated using return on assets. Findings Support was found both for a preference for more hierarchical TMT pay structures in individualistic countries, and that a country’s level of individualism/collectivism mediates the relationship between an organization’s top management’s pay structure and company performance. Originality/value Findings demonstrate that organizations use pay structures consistent with their environments. Results suggest cultural dimensions can contribute to understanding cross-national TMT pay structures and that national culture plays a significant role in the relationship between TMT pay structure and company performance.