It’s the value that we bring: performance pay and top income earners’ perceptions of inequality

Hecht, Katharina (2022) It’s the value that we bring: performance pay and top income earners’ perceptions of inequality. Socio-Economic Review, 20 (4). 1741 - 1766. ISSN 1475-1461

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Abstract

Though the literature on perceptions of inequality and studies of ‘elites’ have identified the importance of meritocratic beliefs in legitimating inequality, little is known about the role of pay setting processes in sustaining ideals of meritocracy. Drawing on 30 in-depth interviews with UK-based top income earners working mainly in finance, I analyse how top income earners perceive economic inequality. My study highlights the crucial role of performance pay for perceptions that top incomes are meritocratically deserved. Participants expressed the view that performance pay, an increasingly prevalent pay-setting practice, ensures that top incomes reflect a share of economic ‘value created’ for shareholders, clients or investors. Focusing on narrow, economic criteria of evaluation perceived as objective, the majority of respondents (‘performance pay meritocrats’) justified any income difference as deserved if it reflects economic contribution. Meanwhile, a minority of respondents (‘social reflexivists’) applied broader evaluative criteria including distributive justice and social contributions.

Item Type:	Article
Official URL:	https://academic.oup.com/ser
Additional Information:	© 2021 The Author
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HN Social history and conditions. Social problems. Social reform H Social Sciences > HC Economic History and Conditions
JEL classification:	Z - Other Special Topics > Z1 - Cultural Economics; Economic Sociology; Economic Anthropology > Z13 - Social Norms and Social Capital; Social Networks D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Date Deposited:	08 Oct 2021 14:18
Last Modified:	12 Dec 2024 02:41
URI:	http://eprints.lse.ac.uk/id/eprint/112212

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