Personality Differences and Executive Compensation

When estimating executive compensation structures econometrically, it is incorrect to ignore an executive's personality type. The problem becomes one of identifying managers and leaders. This study asserts that the key to distinguishing these two types of executives is in their personality types as reflected in their willingness to belong to various kinds of clubs. The authors' findings give new life to the debate over the relative importance of profitability versus sales as determinants of executive compensation. The structures of managers' and leaders' compensation appear to be different.