Events

Prof. Dean Xu
Professor of Management
Monash Business School
Monash University

Board chairs and party secretaries play different roles in Chinese state-owned enterprises (SOEs). The former’s primary role is economic, namely, to improve the productivity and economic performance of the firm, whereas the latter’s role is mainly political, namely, to ensure that the firm stays loyal to the party line and contributes to the political causes of the party. We examine the effect of chair–secretary duality on pay gap and firm productivity by generating alternative hypotheses based on two opposing perspectives. The first perspective is agency theory, which predicts that duality increases pay gap and decreases productivity, while pay gap decreases productivity. The second perspective is stewardship theory combined with role theory, which predicts that duality decreases both pay gap and productivity, while pay gap increases productivity. Empirical analysis on data from 670 Chinese SOEs for the period 2005–2021 lends support to the stewardship and role theory-based predictions. We also find that the negative relationship between duality and pay gap is weaker when a firm has had poorer performance, and stronger when the region in which a firm is located has had more social unrest.