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The social construction of executive pay: governance processes and institutional isomorphism

The social construction of executive pay: governance processes and institutional isomorphism The purpose of this paper is to explore the social construction of executive pay in the UK via an examination of narratives drawn from the social actors on the front-line of Key Management Personnel (KMP) pay determination.Design/methodology/approachThe authors' qualitative research draws upon in-depth interviews with non-executive directors (NEDs) serving on remuneration committees, institutional investors, and independent pay consultants.FindingsRegulation, market pricing and risk mitigation together with the social processes inherent within discharging corporate governance responsibilities create a status-quo-preserving isomorphic effect, restricting context-sensitive approaches to KMP pay determination.Practical implicationsThe paper informs action by company directors, investors and policy makers to address KMP pay controversies, building shared accountability amongst decision-makers focussed on more strategic context-aligned processes and outcomes.Originality/valueThe authors' analysis illustrates how institutional isomorphism can be applied to analyse social actors' interpretations within KMP pay decision-making. The authors show that normative, coercive and mimetic isomorphic forces must be applied in dynamic interaction to extend the explanatory power of institutional isomorphism through the creation of a “No-Come-In” effect in respect of contemporary KMP pay determination settings. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Organizational Effectiveness: People and Performance Emerald Publishing

The social construction of executive pay: governance processes and institutional isomorphism

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2051-6614
DOI
10.1108/joepp-02-2022-0037
Publisher site
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Abstract

The purpose of this paper is to explore the social construction of executive pay in the UK via an examination of narratives drawn from the social actors on the front-line of Key Management Personnel (KMP) pay determination.Design/methodology/approachThe authors' qualitative research draws upon in-depth interviews with non-executive directors (NEDs) serving on remuneration committees, institutional investors, and independent pay consultants.FindingsRegulation, market pricing and risk mitigation together with the social processes inherent within discharging corporate governance responsibilities create a status-quo-preserving isomorphic effect, restricting context-sensitive approaches to KMP pay determination.Practical implicationsThe paper informs action by company directors, investors and policy makers to address KMP pay controversies, building shared accountability amongst decision-makers focussed on more strategic context-aligned processes and outcomes.Originality/valueThe authors' analysis illustrates how institutional isomorphism can be applied to analyse social actors' interpretations within KMP pay decision-making. The authors show that normative, coercive and mimetic isomorphic forces must be applied in dynamic interaction to extend the explanatory power of institutional isomorphism through the creation of a “No-Come-In” effect in respect of contemporary KMP pay determination settings.

Journal

Journal of Organizational Effectiveness: People and Performance – Emerald Publishing

Published: Sep 22, 2022

Keywords: Corporate governance; Executive pay; Institutional isomorphism; Interactive processes; Social construction

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