Influences on Managerial Pay Allocations: A Dependency Perspective

This paper reviews evidence and presents arguments for the view that managerial pay allocations are influenced by the degree of dependence on subordinates and by threats to that dependence. In assessing this view, the issues of managerial discretion in pay allocation and pay as a means of managing dependencies are explored. Major sources of objective and subjective dependence on subordinates are identified. Predictions are made regarding managerial pay allocations under various conditions of dependence and dependency threat. Finally, research and practical implications of the dependency perspective are discussed.