Overpaid CEOs Get Ranked Lower By Employees

Editors' pick: Originally published Oct. 24.

CEOs who receive higher levels of salaries tend to be ranked lower by their employees who are also concerned about the balance between the amount of work they perform and their lifestyles.

When CEOs receive higher salaries and bonuses, their approval ratings decline, according to the study conducted by Glassdoor, a Mill Valley, Calif.-based employment website which includes reviews from former employees. Previous research demonstrates that CEOs earn 204 times the median pay of their employees on average.

Equity theory in academic research proposes that employees judge the fairness of their compensation as it measures to their contribution, said Karen Ehrhart, an associate management professor at San Diego State University.

"They compare their own contributions and outcomes to someone else's contributions and outcomes and they determine whether there is fairness," she said. "If an employee knows or believes that he/she is making less money than another employee, that might still be perceived as fair if the comparison person contributes more to the organization."

The majority of students at San Diego State University are employed either part-time or full-time, and they believe equally that it is both fair and unfair that CEO pay is so much higher than lower level employees.

"Students who say it's fair argue that CEOs have a great deal of responsibility and contribute a great deal to the organization compared to employees and because CEOs contribute more, then they should receive more compensation as a result," she said.

The students who believe it is unfair discuss the issue of "how much more" the CEOs should get paid, Ehrhart said. 

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