Abstract
We investigate how the compensation structure of the top management team (TMT) affects the firm’s competitive effectiveness under different strategies. We delineate the TMT compensation structure along two dimensions -the size of the CEO pay slice and the degree of pay dispersion among the CEO’s top team. Using Miles and Snow’s strategic typology, we find that the relationship between CEO pay slice and competitive effectiveness is more positive for firms following the Prospector strategy than for Analyzers. We also find that higher pay dispersion among the CEO’s top team is more harmful for both Prospectors and Defenders than for Analyzers.
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