Executive Pay Matters: Looking Beyond the CEO to Explore Implications of Pay Disparity on Non-CEO Executive Turnover and Firm Performance

Using a longitudinal data set covering a span of 10 years, we investigate the impact of vertical and horizontal pay disparity on non-CEO executive turnover and subsequent firm performance. Hypothesizing differential responses to pay disparity depending on a non-CEO executive's responsibilities, we first categorize non-CEO executives based on their job demands and their role in the organization (e.g., oversight, divisional). We then explore how pay disparity influences the relationship between executive category and turnover, and how the level of pay disparity impacts the relationship between turnover and firm performance. We find that executive category significantly impacts the likelihood of turnover, and also influences firm performance. Theoretical and practical implications are discussed. (c) 2015 Wiley Periodicals, Inc.