Excessive pay packets 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.

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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."