Changes in executive compensation following an environmental shift: the role of top management team turnover

Authors

  • Theresa S. Cho,

    Corresponding author
    1. Rutgers Business School—Newark and New Brunswick, Rutgers University, Piscataway, New Jersey, U.S.A.
    • Rutgers Business School—Newark and New Brunswick, Rutgers University, 94 Rockefeller Road, Janice H. Levin Building, Piscataway, NJ 08854-8054, U.S.A.
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  • Wei Shen

    1. Warrington College of Business, University of Florida, Gainesville, Florida, U.S.A.
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Abstract

In this study we examine the changes in executive compensation at the top management team (TMT) level following an environmental shift. Using the context of deregulation in the airline industry, we find that: (1) a dramatic environmental change that heightens managerial discretion leads to greater pay level and performance sensitivity of TMT compensation; and (2) the greater the magnitude of turnover among TMT members following the environmental shift, the greater the compensation change. Copyright © 2007 John Wiley & Sons, Ltd.

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