Distributive Justice and CEO Compensation

This article develops a framework for studying individuals' ideas about what constitutes just compensation for chief executive officers (CEOs) and reports estimates of just CEO pay and the principles guiding ideas of justice. The sample consists of students pursuing a Master of Business Adminis...

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Bibliographic Details
Published in:Acta sociologica 2008-06, Vol.51 (2), p.123-143
Main Authors: Jasso, Guillermina, Milgrom, Eva M. Meyersson
Format: Article
Language:English
Subjects:
Attitudes
Business students
Chief executive officers
Chief executives
Compensation
Corporations
Distributive justice
Earnings
Estimation methods
Executive compensation
Executives (Business)
Factorials
Fairness
Gender differentiation
Income Distribution
Income inequality
Individual differences
Inequality
Just compensation
Justice
Leadership
Management
MBA
MBA programs & graduates
Men
Pay
Pay for performance
Social Justice
Sociology
Sociology of law and criminology
Sociology of law and justice
Students
Sweden
Theories
Tolerance
U.S.A
Variability
Wage differentials
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Summary:This article develops a framework for studying individuals' ideas about what constitutes just compensation for chief executive officers (CEOs) and reports estimates of just CEO pay and the principles guiding ideas of justice. The sample consists of students pursuing a Master of Business Administration (MBA) degree in Sweden and the United States. The framework, based on justice theory and making use of Rossi's factorial survey method, enables assessment of ideas of fairness in CEO compensation, including (1) the just CEO compensation, in the eyes of each observer; (2) the principles of microjustice -- observers' ideas about 'who should get what' based on characteristics of CEOs and their firms; and (3) principles of macrojustice -- ideas about the just level and dispersion in compensation across all CEOs. Our estimates yield the following main results: First, there is broad agreement on the median just CEO compensation but substantial inter-individual variation in the principles of microjustice and the other principles of macrojustice. Second, there is remarkable similarity in the distributions of the principles of microjustice and macrojustice across the MBA groups. Other important results include a pervasive gender attentiveness among MBA students and tolerance for large variability in CEO pay.
ISSN:0001-6993
1502-3869
2067-3809
DOI:10.1177/0001699308090039