Social capital at the top: Effects of social similarity and status on CEO compensation

Abstract

This study explored the effects of social capital, measured both absolutely and relatively, on CEO compensation in a sample of 61 CEO-compensation committee chairperson dyads. We controlled for variables representing economic, social comparison, and other social influence explanations for CEO compensation. Social similarity did not influence pay, but a chair's absolute social capital and a CEO's social capital relative to his or her chair's significantly increased CEO compensation. The potential of social capital explanations to increase understanding of the executive wage-setting process beyond that derived from simple economic theories is discussed.