This study aimed at understanding the factors behind the differences in compensation of managers in a manufacturing unit in India. Data on fixed and budgeted variable part of compensation were obtained, along with data on other variables deemed theoretically useful as determinants. Linear regression was used, in an exploratory way, to derive models which made maximum sense theoretically as well as statistically. Anomalous results were also explored further, and a tentative explanation was formulated. Human capital variables (such as education and experience) and performance ratings impacted compensation. Human capital variables (specifically education) probably impacted compensation structure through market value in a way that could be dubbed elitist. There was some reflection of tournament view also (more differential for higher designation) on compensation. The findings are, however, from only one unit in an organisation. Hence one limitation is low external validity. The finding that the market value of educational qualifications possibly impacts compensation in an elitist way over the years should spur further research. This study can sensitise managers about the impact of different decisions on compensation differences over time. It can also motivate them to examine the compensation practices in their organisations in a theory-driven way and illustrates an approach to do so.
