Pay Fairness: The Impact of Employee Productivity and the Separation of Control and Cash Flow Rights
Author
Abstract
This study aims to explore the impact of abnormal top management compensation, the separation of control and cash flow rights (thereafter, the Separation), and employee productivity on employee pay, as well as examine whether employee productivity and the Separation moderate the effect of abnormal top management compensation on employee pay. Using non-financial firms listed on the Taiwan Stock Exchange, we find that abnormal top management compensation and employee pay are complementary to each other. The Separation and employee productivity are positively associated with employee pay, showing that both managerial entrenchment and employee contribution play a vital role in determining employees’ salary contracts. In addition, we find that the Separation and employee productivity positively moderate the effect of abnormal top management compensation on employee pay, implying that either widening the gap between control and cash flow rights or improving employee productivity can reduce pay disparity or improve pay fairness.
Key Words
pay fairness, top management, employee, separation of control and cash flow rights, productivity
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