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How CEOs’ Paychecks Can Impact Their Employees

Source | FastCompany : By JARED LINDZON

They say that ignorance is bliss, but when it comes to their CEOs’ compensation, people aren’t as angry about their boss’s paycheck as you might expect.

According to a recent study by PayScale, an online salary, benefits, and compensation information company, and Equilar, an executive compensation and corporate governance data solutions provider, 79% of those who know their CEO’s compensation believe that it’s appropriate, though the level of approval changes drastically depending on employee compensation and seniority.

“Those at higher levels within the organization tend to be more aware of their CEO’s compensation in the first place, and they also tend to have higher approval ratings,” says Lydia Frank, the senior editorial director for PayScale. “It turns out that fewer people than we thought disapprove of their top executive’s pay, but there is a percentage that cares enough to consider seeking work elsewhere,” she observes.

Of that 21% who disapprove of their CEO’s compensation, 57% of respondents said it negatively affects their view of the company, but only 26% intend on finding employment elsewhere.

The study was conducted by comparing Equilar’s data on U.S.-based companies with more than $1 billion in revenue that filed a proxy statement disclosing CEO compensation—in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. It also included employee compensation data from 80,000 workers across 167 companies between May of 2015 and May of 2016.

More than 22,000 employees were surveyedabout their opinion on their CEO’s compensation, which includes base salary as well as bonuses, stock options, and other forms of compensation, such as benefits and perks.


The study found that higher-level employees tend to be more aware and more approving of their CEO’s compensation, while those on the lower end of the corporate ladder are more likely to be unaware or disapproving.

“We see today that the demographic of people aware of their CEO’s compensation tends to be those employees with more responsibility within the organization—executives, directors, etc. They also tend to be older and have higher incomes themselves,” says Frank. “For workers that make less than $25,000 annually, though, only 72% approve.”

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