We adopt a demographic faultline perspective for top management teams (TMTs) and explore the effect of faultlines on firm performance. Faultlines account for multiple overlapping demographic attributes as opposed to single dimensions of TMT heterogeneity that have been the focus of most upper echelon theory research. We find that TMT relationship-related faultline strength based on gender negatively impacts firm performance whereas TMT task-related faultline strength based on education level and functional background positively impacts performance. Furthermore, consistent with tournament theory assumptions on pay disparity, we find that increases in pay disparity reduces the salience of demographic faultline strength via subgroup recategorization and thus weakens the negative (positive) effect of relationship-related faultline strength in terms of gender (task-related faultline strength in terms of educational level and functional background) on performance. Also, in line with social comparison theory proponents, low TMT pay disparity geared toward promoting equity accentuates the positive performance effects of task-based faultline strength. We discuss implications for studying demographic faultlines within the upper echelons and across various executive compensation systems.