Journal of Management 2004 30(4) 509–528 The Effects of Top Management Team Pay and Firm Internationalization on MNC Performance

We examine relationships among top management team (TMT) compensation, a firm’s degree of internationalization (DOI), and its subsequent levels of market and accounting performance. Consistent with our contingency view of information-processing theory, we find that non-CEO total pay and the use of long-term incentive pay are positively associated with subsequent performance, whereas the CEO–TMT total pay gap has negative effects on firm performance. CEO pay has no relationship with performance and TMT pay effects are much stronger in MNCs with high DOI. © 2004 Elsevier Inc. All rights reserved. Comprehensive reviews of the corporate governance literature have found systematic effects of executive pay level and pay structure on organizational characteristics like per-formance to be elusive, with the single-most consistent correlation to be between firm size and the amount of pay (Murphy, 1999; Tosi, Werner, Katz, & Gomez-Mejia, 2000). Par-alleling such research on the consequences of executive pay are studies that suggest that, beyond the role of firm size, CEOs are typically paid more and receive a larger share of their pay in long-term incentive forms, such as options, when they manage firms that ar