Werner, SteveTosi, Henry L.Gomez-Mejia, Luis2019-10-012019-10-013/4/2005Copyright 2005 Strategic Management Journal. This is a post-print version of a published paper that is available at: https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.452 Recommended citation: Werner, Steve, Henry L. Tosi, and Luis Gomez‐Mejia. "Organizational governance and employee pay: How ownership structure affects the firm's compensation strategy." Strategic Management Journal 26, no. 4 (2005): 377-384. DOI: 10.1002/smj.452 This item has been deposited in accordance with publisher copyright and licensing terms and with the author’s permission.https://hdl.handle.net/10657/4917This research investigated how the ownership structure is related to the firm's overall compensation strategy. The findings extend previous research that focused primarily on CEO compensation strategy. We show that there are significant differences in the compensation practices that apply to all employees as a function of the ownership structure. The results show that for owner‐controlled firms and owner‐managed firms there is significant pay/performance sensitivity for all employees. In management‐controlled firms, changes in pay are related to changes in size of the firm. These findings lead us to conclude that ownership structure not only affects upper management's pay, but also the pay of all employees through substantial differences in the firm's compensation practices. Copyright © 2005 John Wiley & Sons, Ltd.en-USExecutive compensationEmployee payOwnership structureArticle