Chief marketing officer pay: The revenue growth consequences of employing internal and external benchmarks

The chief marketing officer (CMO) is typically held accountable for generating firm revenue growth, but it is unclear whether current top management team (TMT) compensation practices, focused on an external benchmarking process, best align CMO behavior with this outcome. Drawing on equity theory, we explore how CMO pay (i.e., salary), relative to external and internal referents, impacts revenue growth. Using over 20 years of data for 457 public U. S. firms, we find that CMO-CFO relative pay (i.e., the Chief Finance Officer) positively relates to firm revenue growth, but CMO pay relative to the industry median does not. Further examination reveals an asymmetry in the effect for CMO-CFO relative pay—when CMOs are paid above the CFO, there is no impact on revenue growth, but when CMOs are paid below the CFO, there is a strong association to revenue growth (i.e., hampering growth), as such pay inequity can be particularly demotivating. Moderation analysis using CMO tenure provides support for this mechanistic pathway. Weaker evidence is found for the effect between CMO-highest paid TMT member relative pay and revenue growth, and no relationship between CMO-CEO relative pay and revenue growth is observed. Findings support the CFO as a key CMO pay referent and indicate that the common practice of using predominantly external benchmarks to determine CMO pay is not optimal, providing valuable insight and guidance to better align CMO pay and firm growth.