Vertical Pay Dispersion Research Articles

Understanding Vertical Pay Dispersion in the Public Sector: The Role of Publicness

This study introduces vertical pay dispersion into public management research, a prevailing equity issue in discussions in organizations and society. Bridging tournament and equity theory with the publicness debate, the study analyses how manager-to-worker pay ratios of state-owned enterprises (SOEs) are affected by the dimensions of publicness – ownership, funding, and control. For a unique, hand-collected, five-year data set, the study finds that ownership publicness partly affects vertical pay dispersion, and the effects are moderated by city and SOE size. It enhances the understanding of vertical pay dispersion in the public sector and offers a research agenda for the determinants.

The Joint Effects of Supervisor Pay Transparency and Vertical Pay Dispersion on Reporting Honesty

ABSTRACTWe experimentally investigate how supervisor pay transparency interacts with vertical pay dispersion to affect subordinates' reporting honesty in a budgeting setting. We find that the effect of supervisor pay transparency relative to pay secrecy becomes more negative as vertical pay dispersion becomes higher. Our findings suggest that while supervisor pay transparency complements an egalitarian pay structure by increasing reporting honesty, it does not fare along with high vertical pay dispersion as the combination of the two appears to decrease reporting honesty, even when such high dispersion can be justified. Further investigation suggests that our result is not driven by the feeling of unfairness toward high supervisor pay, but by a benchmarking effect (i.e., subordinates use supervisor pay as a pay standard and try to find ways to earn a similar amount).

Vertical Pay Dispersion, Peer Observability, and Misreporting in a Participative Budgeting Setting

ABSTRACTIn this study, we examine the joint effect of vertical pay dispersion and peer observability on subordinates' misreporting choices. We adopt a participative budgeting setting in which two subordinates report to one superior, and we manipulate vertical pay dispersion (low/high) and peer observability (absent/present). Subordinates have private information about actual project costs and can over‐report project costs to the superior without detection and thus create budgetary slack. When a peer's reporting choices are observable, we predict and find that peer reporting choices have an asymmetric influence on the focal subordinates' reporting choices, and this asymmetric influence depends on the level of vertical pay dispersion. Specifically, we find that when vertical pay dispersion is low, subordinates who observe peer reports containing low slack misreport less, whereas observing peer reports that contain high slack has no significant effect. However, when vertical pay dispersion is high, subordinates who observe peer reports containing high slack misreport more, whereas observing peer reports that contain low slack has no significant effect. Driven by these asymmetric effects, subordinates misreport less in the presence of peer observability than in its absence when vertical pay dispersion is low and misreport more in the presence of peer observability than in its absence when vertical pay dispersion is high. Overall, our findings suggest that when a firm has a more egalitarian pay structure (i.e., low vertical pay dispersion), an open information policy is conducive to a more honest reporting environment, whereas under a more hierarchical pay structure (i.e., high vertical pay dispersion), open information policies can compromise the honesty of subordinates' reports.

The Joint Effects of Supervisor Pay Transparency and Vertical Pay Dispersion on Reporting Honesty

We investigate how supervisor pay transparency interacts with vertical pay dispersion to affect subordinates’ reporting honesty in a budgeting setting. As predicted, results from our experiment suggest that the effect of supervisor pay transparency relative to secrecy on reporting honesty becomes more negative (more positive) as vertical pay dispersion becomes higher (lower). Our findings suggest that supervisor pay transparency complements an egalitarian pay structure by increasing reporting honesty, whereas it does not fare along with high vertical pay dispersion by decreasing reporting honesty. Further investigation suggests that this result is not necessarily driven by the feeling of unfairness towards high supervisor pay, but by a benchmarking effect (i.e., subordinates use supervisor pay as a pay standard and try to find ways to earn a similar amount).

The Relationship between Vertical Pay Dispersion and Turnover Intention: An Exploratory Study on the Difference Effect of Reference Group and Job Level

임금격차는 조직구성원에게 동기화 또는 박탈감을 제공하는 기제로 작동하기 때문에 관리적 측면에서 관심을 가져야할 주제이다. 본 논문은 수직적 임금격차와 이직의도, 임금경쟁력과의 상호작용 효과를 살펴보았다. 더불어 조직구성원이 임금비교를 위한 참조집단 설정이 그들의 지각에 어떠한 영향을 미치는지를 살펴보았고, 임금격차에 대한 직급별 인식의 차이를 탐색하였다. 다수준분석 결과, 임금격차와 이직의도는 부의 관계가 나타났으며, 임금경쟁력과 상호작용 효과를 확인하였다. 그리고 임금격차와 조직구성원 지각의 관계는 참조대상 및 직급별로 효과의 크기가 다르게 나타났다. 사원-부장급의 전반적인 임금격차에 대한 각 직급별 지각의 차이를 탐색하였다. 분석결과, 과장급에 비해 사원급 및 대리급이 임금격차와 이직의도 간의 계수값이 크게 나타났다. 이와 같은 분석결과를 바탕으로 학술적 및 실무적 시사점을 제시하였다.Pay dispersion is a topic that should be of interest from an administrative point of view because it acts as a mechanism to provide organizational members with motivation or relative deprivation. This paper examined the interaction effect between vertical pay dispersion, turnover intention, and wage competitiveness. In addition, the effect of reference group setting for pay comparison on organizational members’ perceptions was examined. As a result of multi-level analysis, pay dispersion and turnover intention showed a negative relationship, and pay competitiveness and interaction effect were confirmed. The relationship between pay dispersion and perception of organization members showed different effect sizes for reference and job level. The differences in perceptions of each job level according to the overall pay dispersion of the employee-manager level were explored. Results showed that relationships between both entry level employees’ and junior employees’ pay dispersion and turnover intention are higher than those of managers. Based on the results of this analysis, academic and practical implications are suggested.

Vertical Pay Dispersion and Innovation Spirit of New Ventures

How differentiated salary management policies affect the innovation spirit of new ventures is an important academic issue. Considering that there is no much comparability of the pay between corporate executives and grassroots employees, this paper subdivides the pay dispersion of new ventures into two levels:pay dispersion between top managers and middle managers (PayDHM), and pay dispersion between middle managers and grassroots workers (PayDML). And it explores the effects of vertical pay dispersion at different levels on innovation activities of new ventures. The results indicate that there exists a significant inverted U-shaped relationship between vertical pay dispersions and the innovation spirit of new ventures, which means that the innovation spirit of new ventures increases first and then decreases as the vertical pay dispersion widens. In addition, the role of pay dispersion between middle managers and grassroots workers in the innovation spirit of new ventures is also affected by board governance and external environment inclusiveness, that is to say at the same level of pay dispersion between middle managers and grassroots workers, new ventures with a board of directors and in a strong inclusive environment have stronger innovation spirit. It extends the achievements of pay dispersion theory research and has important significance to help new ventures to formulate and perfect pay incentives policies.

Pulling in different directions? Exploring the relationship between vertical pay dispersion and high‐performance work systems

Vertical pay dispersion (VPD), a hierarchical pay structure used to motivate employees, has traditionally been studied separately from high‐performance work systems (HPWSs). As a component of HPWSs, incentive‐based compensation schemes focus on employee‐ or team‐level incentives. However, the influence of the simultaneous utilization of VPD and HPWS on performance remains understudied. This study addresses the question of whether these approaches to managing human capital serve as complements or substitutes to one another. VPD and HPWS are argued to substitute for one another with respect to motivation‐ and skill‐enhancing practices. The opposite notion is true in regard to opportunity‐enhancing HPWSs, which serve to amplify the effectiveness of VPD. In a multisource, longitudinal sample of South Korean firms, the hypothesized predictions are supported.

Vertical Pay Dispersion on Organizational Performance: Effects of Different Compensation Components

We study the relationship between vertical pay dispersion and organizational performance by integrating tournament theory with the concept of explained pay dispersion. We use a nationally-represent...

Discussion of “The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting”

AbstractGuo, Libby, and Liu (2017) (hereafter GLL), examine how pairs of experimental subjects interact in a game framed as a funding request from a privately informed subordinate to a superior. When the superior's pay is higher than the subordinate's, subordinates display more self‐serving dishonesty and superiors are more tolerant of it than when their pay is the same. In this discussion, I compare GLL's design with an ultimatum game, consider additional tensions that arise in pay‐level comparisons, address the applicability of their results, and suggest some extensions. I conclude by calling for new theory that regularizes GLL's surprising findings.

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

AbstractVertical pay dispersion is the difference in pay across different hierarchical levels within an organization (Milkovich and Newman ). While vertical pay dispersion may be useful in attracting, retaining, and motivating highly skilled employees (Lazear and Rosen ; Lazear ; Prendergast ), our study investigates a potential disadvantage; specifically, the negative impact of perceived unfairness of vertical pay dispersion on employees' budgeting decisions. We predict and find that high vertical pay dispersion motivates subordinates to misreport costs to a greater extent than low vertical pay dispersion. Furthermore, we predict and find that superiors, on average, exercise more lenient cost controls when vertical pay dispersion is high rather than low. Supplemental analysis indicates superiors are more lenient on average because of their aversion to inequity caused by vertical pay dispersion. Our results suggest that high vertical pay dispersion can compromise the overall corporate budgeting environment, where higher levels of misreporting by subordinates goes unchecked by superiors.

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

Vertical pay dispersion is the difference in pay across different hierarchical levels within an organization (Milkovich and Newman 1996). While vertical pay dispersion may be useful in attracting, retaining and motivating highly skilled employees (Lazear and Rosen 1981; Lazear 1995; Prendergast 1999), our study investigates a potential disadvantage; specifically, the negative impact of perceived unfairness of vertical pay dispersion on employees’ budgeting decisions. We predict and find that high vertical pay dispersion motivates subordinates to misreport costs to a greater extent than low vertical pay dispersion. Furthermore, we predict and find that superiors, on average, exercise more lenient cost controls when vertical pay dispersion is high rather than low. Supplemental analysis indicates superiors are more lenient on average due to their aversion to inequity caused by vertical pay dispersion. Our results suggest that high vertical pay dispersion can compromise the overall corporate budgeting environment, where higher levels of misreporting by subordinates goes unchecked by superiors.

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting