The _____ theory argues that executive pay rises to maintain the same relationship to the salaries of lower-level employees.

Question

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The social comparison theory suggests that executives compare their pay to that of their peers in similar positions, rather than based on a rational economic approach or team production. Through these comparisons, executives are motivated to maintain the same relationship between their pay and the salaries of lower-level employees. The agency theory focuses on aligning executive incentives with shareholder interests, while the team production theory suggests that executive compensation is tied to the overall performance of the company.

The _____ Theory Argues That Executive Pay Rises to Maintain