Comments on two sides of CEO pay injustice

Abstract

Purpose This is a short commentary on Herman Aguinis, Geoffrey Martin, Luis Gomez-Mejia, Ernest Boyle and Harry Joo (2017): “Two sides of CEO pay injustice: A power law conceptualization of CEO over and underpayment.” Design/methodology/approach Using insights from prior studies on executive compensation, the author’s commentary presents a critical evaluation of “Two sides of CEO pay injustice: […].” In addition, the author offers potential avenues for further research. Findings The paper “Two sides of CEO pay injustice” is well executed and makes several significant contributions to the management and executive compensation literature. Particularly, noteworthy are the use of advanced quantitative methods, the use of power law distributions to explain chief executive officer (CEO) pay outcomes, the focus on pay-for-performance and the role of justice in CEO outcomes. The author’s commentary in the present paper discusses the measurement of CEO pay and performance, poses alternative estimation methods to explore the pay-for-performance link and offers thoughts on justice theory in the context of CEO pay. Research limitations/implications The authors’ findings may be briefly stated as CEO pay is better described by a power law distribution than a normal distribution, CEO pay is not linked to firm performance and the patterns of CEO pay does not conform to patterns of distributive justice. Overall, the authors provide an important way to evaluate CEO pay outcomes. Thy set the stage for new avenues of research. Practical implications CEO pay is a highly controversial subject in the domain of corporate governance. This paper offers boards of directors and policymakers a method to better understand the success or failure of boardroom pay policies. Social implications CEO pay is an important social measure. Originality/value The authors’ paper is original by offering a method for determining over and underpayment of CEOs. The author in the present paper makes suggestions on how one might extend the research.