Extending
this, I rely on the informativeness principle to argue that the use of non-financial information will provide
relevant information incremental to that provided by traditional financial measures when the firm relies
on human capital. I then draw on equity theory, which predicts that employees’ behaviors and attitudes
are negatively affected when they perceive inequity in the firm’s pay structure. Sprinkle (2003) notes that
issues of fairness and equity may well influence contracting.