Employee reactions to pay dispersion: A typology of existing research

Pay Dispersion

“…Future researchers would be well served to combine their ideas with the existing findings on explained or normatively accepted pay variation reviewed here as a way of advancing our knowledge. Downes & Choi (2014) developed predictions between a simple typology of pay dispersion (performance-or non-performance-based by vertical and horizontal dispersion) and developed predictions for outcomes of the typology. They drew from equity, expectancy, and tournament theories to demonstrate how differential predictions could be made with organizational performance as the ultimate outcome.…”

Motivational effects of pay dispersion in pay for performance programs implemented in Romanian companies

“…In the companies with compressed pay systems, employees at the two extremes of the pay distribution are close to each other, while other organizations use a dispersed pay system, in which the differences between workers are much higher even at the same organizational level (Downes and Choi, 2014). Concerning the associations between pay dispersion and employees' performance, several studies revealed significant positive relationships between the two.…”

“…From this point of view, when employees perceive the reasons of the pay differences as legitimate, pay dispersion increases their motivation and performance (Downes and Choi, 2014). On the other hand, if workers do not accept the source of the pay variability among them, these differences in financial rewards are detrimental to their motivation.…”

“…As a result, those earning smaller financial rewards lower their work effort in order to make pay differences equitable. Thus, in these companies, pay compression is recommendable (Bloom, 1999;Downes and Choi, 2014), in order to avoid such detrimental effects of pay variation on low earners' motivation. On the other hand, in the organizations that implement pay for performance programs, due to the fact that pay dispersion tends to be perceived as equitable by employees, large differences in pay should foster work motivation.…”

A New Perspective on Incredible Growth of CEO-worker Pay Gap: Risk Aversion on Potential Loss of Firm Value

“…Though both the principal-agent theory and the tournament theory have explained the forming and increasing mechanisms of EWPG from their own perspectives (Patrick E. Downes, &Daejeong Choi, 2014; David Gill, &Rebecca Stone, 2010) [3,4], both the extremely high level of EWPG and the incredible increase rate of EWPG cannot be clarified to a good degree. In this case, in order to produce theoretical guidance for the government and the firms in designing more effective countermeasures on limiting EWPG to a reasonable level, some new theoretical perspectives should be initiated by the scholars.…”