The Executive Wage Disparity and Corporate Performance

Abstract

The connection between executive salary disparity and corporate yield has garnered a lot of attention since the continuous development of China's economic marketization, and some researchers have found a variety of economic consequence theories on the relationship between the two, however, there is still a lack of unified explanation between different theories. Therefore, by summarizing the three different theories on economic consequences in the existing stydies, this paper analyses the differences in their contradictory points, and accordingly explores the connection between the executive pay disparity and company success. The analysis finds that the "inverted U-shaped" theory is more supported from the point of overcoming the contradictions, i.e., the tournament theory and the behavioural theory have different scopes of application, so that both positive and adverse correlations between the executive wage difference and business performance exist, and the application of which should focus on the important moderating and intermediary variables in the relationship between the two to determine what stage it belongs to. This is a reminder that pay formulators need to work closely with the characteristics of the company to develop the pay gap that best suits them.