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

Katharina Hecht

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: financial services; elites; income distribution; inequality; mertiocracy; perceptions (search for similar items in EconPapers)
JEL-codes: D31 D63 Z13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2022-10-01
New Economics Papers: this item is included in nep-hrm
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Published in Socio-Economic Review, 1, October, 2022, 20(4), pp. 1741 - 1766. ISSN: 1475-1461

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:112212

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