How Chief Marketing Officers are Paid: Consequences of CMO Compensation

Chief Executive Officers (CEOs) expect Chief Marketing Officers (CMOs) to “grow the business”. One of the ways CMOs can be motivated to do so is through an effective compensation package. This research synthesizes the current executive compensation literature to show how marketing leadership and top management team, firm, and industry level strategies interact with one another to influence firm performance. The first study develops a comprehensive strategic literature review based on highly rated journals from marketing and offers a major step forward in developing research questions and advancing the development of agency theory, upon which this dissertation is built on. The chapter concludes by identifying and exploring two key areas that support the proposed CMO compensation frameworks: (1) Impact of CMO compensation on market orientation, and (2) Degree of risk associated with executive compensations. The second study uses secondary panel data from 2006-2018 to identify top management team, firm, and industry-level factors that impact the relationship between executive compensation and firm outcomes. Understanding effects of CMO equity-to-pay ratio can impact the firm’s level of marketing orientation through five interrelated sub-dimensions: (1) Competitor Orientation, (2) Customer Orientation, (3) Inter-functional Coordination, (4) Long-Term Focus, and (5) Profitability. Finally, the third study uses secondary panel data from 2006-2018 to identify CMOs’ degree of risk taking through their equity-based wealth. These two frameworks lend themselves to better understand the impact CMO compensation has on firm performance