Executive compensation: influence and reciprocity effects

Abstract

PurposeThe purpose of this paper is to understand the effects of influence and reciprocity as the elements in the determination of executive compensation.Design/methodology/approachA purposive sample was drawn, which comprised of 13 respondents chosen for their expertise relating to the determination of executive compensation in state-owned enterprises (SOEs). A semi-structured interview guide was used as the data-gathering instrument. A thematic analysis technique was used for data analysis.FindingsThe findings in this study identified three themes resorting under influence as crucial in the process of determining executive compensation, namely an executive’s social capital, intellectual capital and social comparison. Two major themes emerged under reciprocity, namely the pay-performance relationship and role complexity. Finally, the political-symbolic role emerged as the main theme that described the relationship between influence and reciprocity.Practical implicationsThe findings provide a more detailed description of the process involved in determining executive compensation in SOEs.Originality/valueThere has been limited if any, empirical study on the process involved in setting executive compensation. The limited focus has always been on accounting measures. Incorporating the socio-psychological view attempts to provide a more comprehensive and conclusive explanation of the process of determining executive pay in theory and practice.