Politically connected boards and top executive pay in Chinese listed firms

Open Access

Abstract

This is the peer reviewed version of the following article: CHIZEMA, A. . et al., 2015. Politically connected boards and top executive pay in Chinese listed firms. Strategic Management Journal, 36 (6), pp. 890-906, which has been published in final form at http://dx.doi.org/10.1002/smj.2253. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. ; Drawing on social comparison theory, this study examines the relationship between politically connected boards and top executive pay. Moreover, given the socialist orientation of China, tests are also carried out to establish the relationship between politically connected directors and pay dispersion across the firm. We find a negative association between politically connected boards and top executive pay. We also find that politically connected boards are negatively associated with pay dispersion, i.e., the higher the number of political directors on the board the smaller the gap between top executive pay and average employee pay. Finally, our study shows that politically connected directors weaken the pay-performance link. These findings have important theoretical, policy, and managerial implications.