Journal article

The Social Context of Compensation Design: Social Norms and the Impact of Equity Incentives

L Zolotoy, D O'Sullivan, G Martin

Human Resource Management | Wiley | Published : 2018

Abstract

Drawing on arguments from institutional theory, this study examines how social norms—specifically, local religious social norms—affect the motivational impact of equity‐based incentives. We test our model using longitudinal data on local religious norms, CEO equity incentives, and firm value. Consistent with our theoretical predictions, we find that local religious social norms attenuate the impact of CEO option incentives upon firm value. Furthermore, we find that the attenuating impact of local religious social norms increases with managerial discretion. These findings provide valuable insight for human resource professionals aiming to design compensation contracts for employees that are a..

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