Purpose Although CEOs and CFOs are considered the strategic leadership duo in firms, there is usually a substantial gap between CEO pay and CFO pay. While past research has investigated the consequences of pay gaps in top management teams, the question of what leads to pay gaps between the CEO and the CFO remains an open one. In this paper, we address this gap by focusing on the antecedents of CEO−CFO pay gaps and studying how top managers' power and celebrity impact pay gaps. Design/methodology/approach Drawing on managerial power theory, we suggest a direct effect, following which power gaps lead to pay gaps. In addition, using arguments from impression management literature, we propose a mediation effect of celebrity alongside direct effects of power. We test our hypotheses by applying panel regression analyses, using data on CEOs and CFOs from S&P 500 firms. We disaggregate power into several dimensions and analyze their respective effects on CEO−CFO pay gaps. Findings Our empirical analyses show that power gaps are positively associated with pay gaps between CEOs and CFOs. However, not all power dimensions are equally relevant—while we can empirically show that prestige, expert, and structural power gaps matter, ownership power gaps show no significant effect on pay gaps. Furthermore, our findings provide evidence that celebrity gaps mediate the relationship between CEO−CFO power gaps and pay gaps, emphasizing the role of impression management in shaping executive compensation. Originality/value Being the first to study the antecedents of CEO−CFO pay gaps, we identify power, celebrity, and their interplay as key determinants of pay gaps, making a meaningful addition to upper echelons literature. We contribute to managerial power theory and impression management literature, developing novel theoretical lines of argument and extending their applicability to explaining pay gaps. We add to executive compensation literature by focusing on relative pay instead of absolute pay and by investigating the CEO−CFO dyad. Our study also provides practical implications surrounding executive compensation setting.
Baldermann et al. (Tue,) studied this question.