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CEO pay fairness as a predictor of stakeholder management

By Eric A. Fong

Abstract

This study examines the relationship between chief executive officer (CEO) pay fairness and future stakeholder management (SM) as well as the effect of the board of directors on this relationship. The results show that CEO pay fairness has an effect on future SM such that when underpaid, CEOs decrease SM and when overpaid, CEOs increase SM. Additionally, the relationship between CEO pay fairness and SM becomes stronger as the ratio of inside directors on the board increases, which suggests that as both management control increases and board diversity decreases, the CEO's control over SM increases. Implications for SM and CEO pay are discussed.CEO compensation Fairness Stakeholder theory Stakeholder management Board of directors

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