Although institutional theorists maintain that the widespread diffusion of ISO 9000 is the result of institutional forces, they have neglected the potential gains to top management in the perpetuation of the standard. Based on a longhorizon event study with control firms to detect long-term abnormal financial gains, we investigate the impact of ISO 9000 adoption on CEO compensation in the U.S. manufacturing industry from 1994 to 2006. We find that the CEOs' total cash compensation was positively adjusted when their firms received ISO 9000 certification, and they received higher-value stock options when their firms embarked on ISO 9000 certification. However, the performance of the ISO 9000 certified firms was not improved throughout this period. Our further analyses suggest that it is likely that the CEO influences the board to obtain higher compensation under an institutionalized environment. Contrary to the traditional institutional theory-based view, we argue that a highly institutionalized environment does provide political opportunities for organizational actors to garner personal advantages.
- CEO compensation
- Institutional theory
- ISO 9000
ASJC Scopus subject areas
- Strategy and Management
- Organizational Behavior and Human Resource Management
- Management of Technology and Innovation