Employee-Based Brand Equity: Why Firms with Strong Brands Pay Their Executives Less

Tavassoli, N T, Sorescu, A and Chandy, R (2014) Employee-Based Brand Equity: Why Firms with Strong Brands Pay Their Executives Less. Journal of Marketing Research, 51 (6). pp. 676-690. ISSN 0022-2437

Abstract

This article examines the concept of employee-based brand equity—the value that a brand provides to a firm through its effects on the attitudes and behaviors of its employees—and empirically demonstrates its significance on executive pay. Executives value being associated with strong brands and, therefore, accept substantially lower pay at firms that own strong brands. Consistent with identity theory, this effect is stronger for chief executive officers and younger executives than for other executives. Data from a large, cross-industry sample of executives suggest that academics and practitioners should take a broader view of the contributions of brand-related investments to firm value and make use of strong brands in pay negotiations that are typically viewed as being outside the realm of marketing.