Higher-Paid CEOs Are Found to Have Lower Approval Ratings From Employees
If you’re a well-paid CEO, your employees may not think you’re doing a great job.
That’s according to a new Glassdoor survey, which collected 1.2 million approval ratings from about 70,000 different publicly traded companies. From the data, researchers found that highly paid CEOs have significantly lower approval ratings than CEOs who are paid less.
As of 2014, the study notes, the average CEO has earned 204 times the amount of a median worker’s pay at S&P 500 companies, as top executives’ average pay has continued to increase in recent decades.
Pay raises are mainly due to merit, the study found, but some are the result of managerial power, i.e., the ability of CEOs to give themselves a raise. Out of the companies sampled, CEOs made an average yearly salary of $12.3 million.
Albeit complex, the study affirms that there is a link between CEO pay and employee approval within public companies at a high level. Overall, lower-paid CEOs received the highest approval marks, while higher-paid CEOs received the lowest approval ratings.
The study also found that when overall employee satisfaction is higher with a company, the effect of lower CEO approval ratings is lessened. CEOs who were also company founders boasted 3.2% higher approval ratings compared with those who were externally hired or internally promoted.
The study found that gender didn’t have a statistical impact on CEO approval ratings. But since women only made up 5% of the executives surveyed, it was hard for researchers to draw strong conclusions from such a small amount.
Age, tenure on the job, and education had no statistical impact on CEO approval ratings, according to the study.
The most highly rated CEOs were found in real estate (76.1%), construction (72.8%), information technology (72.6%), finance (72.4%), and insurance (71.8%). The lowest average CEO ratings were in retail (61.4%), manufacturing (64.1%), transportation (64.3%), mining (64.4%), and media (64.5%).