Executive compensation in thé information technology industry

Mark C. Anderson, Rajiv D. Banker, Sury Ravindran

Research output: Contribution to journalArticle

109 Citations (Scopus)

Abstract

An innovative business practice attributed to the information technology (IT) industry is the aggressive use of employee stock options to compensate executives and other employees. In this study, we investigate whether the greater use of stock options in the IT industry can be explained on the basis of general economic relationships that apply to firms in all industries. To examine differences in compensating top executives, we estimate a system of simultaneous equations that is designed to accommodate interconnections between performance, the level of compensation, and the mix of compensation components. We document that the shares of both bonus and option pay increase with performance and that the pay level and the extent of incentive pay positively affect firm performance. We identify economic factors that may influence the use of options and show that there are significant differences in these factors between IT and other industries. We find that, while much of the greater use of options by IT firms is explained by the economic factors, significant residual differences remain. We also find that, when performance and other factors are considered, the level of executive pay in the IT industry is not higher than in other industries.

Original languageEnglish (US)
Pages (from-to)530-547
Number of pages18
JournalManagement Science
Volume46
Issue number4
StatePublished - Apr 2000
Externally publishedYes

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Information technology
Industry
Economics
Personnel
Compensation and Redress
Executive compensation
Economic factors
Factors

Keywords

  • Executive compensation
  • Information technology industry
  • Pay for performance
  • Stock options

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management
  • Management Science and Operations Research

Cite this

Executive compensation in thé information technology industry. / Anderson, Mark C.; Banker, Rajiv D.; Ravindran, Sury.

In: Management Science, Vol. 46, No. 4, 04.2000, p. 530-547.

Research output: Contribution to journalArticle

Anderson, MC, Banker, RD & Ravindran, S 2000, 'Executive compensation in thé information technology industry', Management Science, vol. 46, no. 4, pp. 530-547.
Anderson, Mark C. ; Banker, Rajiv D. ; Ravindran, Sury. / Executive compensation in thé information technology industry. In: Management Science. 2000 ; Vol. 46, No. 4. pp. 530-547.
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