The purpose of this paper is to explore the social construction of executive pay in the UK via an examination of narratives drawn from the social actors on the front-line of Key Management Personnel (KMP) pay determination.
Our qualitative research draws upon in-depth interviews with non-executive directors serving on remuneration committees, institutional investors, and independent pay consultants.
Regulation, market pricing and risk mitigation together with the social processes inherent within discharging corporate governance responsibilities create a status-quo-preserving isomorphic effect, restricting context-sensitive approaches to KMP pay determination.
The paper informs action by company directors, investors and policy makers to address KMP pay controversies, building shared accountability among decision-makers focused on more strategic context-aligned processes and outcomes.
Our analysis illustrates how institutional isomorphism can be applied to analyse social actors’ interpretations within KMP pay decision-making. We show that normative, coercive and mimetic isomorphic forces must be applied in dynamic interaction to extend the explanatory power of institutional isomorphism through the creation of a “No-Come-In” effect in respect of contemporary KMP pay determination settings.