Meta-Theoretical Framework for Executive Compensation

Abstract

This paper highlights a myriad of conceptual theoretical perspectives and their implications for executive compensation. Theoretical understanding of the determinants of executive pay is still fragmented. The lack of consensus is most visible between scholars in economics and finance, who advocate for the primacy of market-based explanations, and scholars outside of these two disciplines, who have challenged these explanations and some of their underlying assumptions by highlighting the importance of the power of social-psychological processes and the institutional environment in the creation of compensation practices. To improve the understanding of the concept and application of executive compensation, there is a need to take a closer look at the conceptualisation and theoretical perspectives that characterize the assumptions often implicit in empirical research on executive compensation. It is only through conceptualisation and a clear theoretical stance that an empirical framework can be developed. A conceptual analysis of theoretical perspectives and models is undertaken in this study. While such a conceptual framework cannot include every theory or dimension of executive compensation which is mentioned in the literature (because of the broad range of disciplines represented), it nevertheless attempts to offer a generic and integrated approach to executive compensation.

DOI: 10.5901/mjss.2014.v5n23p1686