In this paper we examine the extent to which fairness considerations are salient to senior executives and consider the implications for agency theory, tournament theory, and the design of top-management incentives. We look for patterns in a unique data set of senior executive preferences and seek explanations for these patterns using a model of fairness first advanced by Fehr & Schmidt (1999). We propose a number of amendments to Fehr & Schmidt’s model. We challenge some of the standard tenets of agency theory and tournament theory, demonstrating why equity considerations should be taken into account. We add to the growing literature on behavioural agency theory.
- agency theory
- executive pay
- tournament theory
Pepper, A., Gosling, T., & Gore, J. (2015). Fairness, envy, guilt and greed: building equity considerations into agency theory. Human Relations, 68(8), 1291-1314. https://doi.org/10.1177/0018726714554663