Whole Network Most Recent TOP10 Accounting Compliance Ethics SOX

 

Knock-on effects of CEO pay

Filed in archive executive pay by leon on October 03, 2006

Knock-on effects of CEO pay
Excessive pay packetslinks for bosses could be having an enormous impact on organisations, according to a fascinating new study.

The research confirms that we use other people's outcomes to evaluate our own. It's partly about competition, but more importantly, it's about fairness.

.

The study Overpaid CEOs and Underpaid Managers: Fairness and Executive Compensation found that impact of the CEO's pay cascades right through the organisation.

Analysing data from more than 120 companies over a five year period, the researchers Charles Reilly from Stanford and James Wade from Rutgers, found that the CEO overpayment trickled through the organisation, in diminishing degrees.

The research suggested, for example, that if a CEO was overpaid by 64 per cent, individuals at the same company at Level 2, which takes in position like Chief Financial Officer and Chief Operating Officer, were overpaid 26 per cent. People at level (division general managers) were overpaid by 12 per cent.

This is really important because as the researchers point out, that could run into 10s of millions of dollars a year.

On the other hand, if CEOs were overpaid, some subordinates were more likely to leave.

Again this important, because it goes to the issue of employee turnover. And the researchers point out, perceptions of fairness play a critical role.

"Perhaps overpayment of the CEO is particularly salient to those at lower levels in the organization because of the fact that their financial situation contrasts most sharply with that of the CEO. In this instance, inequity relative to the CEO may create more intense feelings of injustice. Such a possibility is supported by the outrage that is often displayed by unions and the business press when CEOs of low performing firms are well compensated while lower-level members suffer pay cuts and layoffs. Indeed, a final provocative implication of our findings is that at least at lower levels in the organization, employees are more likely to leave the company, even if they are overpaid relative to the external market, if the CEO is more overpaid than they are."





Permalink: Knock-on effects of CEO pay
Tags: CEO  pay    effects  more  corporate  knock+effects  overpaid+cent  through+organisation 

Trackback: http://www.creative-weblogging.com/cgi-bin/mt-tb.pl/37903



Related Entries:

Personalized Special Light Effects for Your Photos - 20 February 2007

Schenzhen, China - 22 February 2007

Cell Phones, No Adverse Health Effects? - 13 September 2007

Knock Fashionably - 28 October 2007

Advertisement


Advertisement


RSSrss   | See all blog subscribe options
Googlegoogle   |   What is RSS?
Yahoo!yahoo
AddthisAddThis Feed Button
BloglinesBloglines
Newsletter

Use the search to look for other interesting posts



 
  • Advertise with us

  • Learn more about our advertising options or email advertising - at - creative-weblogging.com or give Luis a call at +1 (650) 331 8047.


  • Other blogs in the same channel in the Creative Weblogging Network







 
Tagcloud: Accounting boards of directors Compliance corporate crime corporate governance corporate reputation Ethics events executive pay litigation markets regulators risk shareholder activism SOX Sponsored Blog strategy