Final answer:
Top managers influence executive pay through advocating for performance-based incentives, aligning executive pay with company performance, and participating in compensation committee decisions.
Step-by-step explanation:
Top managers influence executive pay in several ways:
- Advocating for performance-based incentives: Top managers may advocate for performance-based incentives, such as bonuses or stock options, which are tied to the company's performance. This encourages executives to work towards achieving company goals and increases accountability.
- Aligning executive pay with company performance: Top managers may strive to align executive pay with the company's performance. This can be done through performance evaluations and tying compensation to key performance indicators.
- Participating in compensation committees decisions: Top managers often participate in compensation committees, where decisions regarding executive pay are made. They provide valuable input and help determine appropriate compensation packages.