Tournament mechanisms suggest the need for ever larger rewards to
motivate those at the highest organizational levels. But arguments for
the efficiency of executive pay compression have also been made. This
study reports the results of an empirical investigation of executive
compensation using over two-hundred firms and in excess of two thousand
executives per year over a 5-year period. Results are consistent with
the operation of tournaments but fail to find support for the empirical
importance of considerations of pay equity at the top of corporations.