Why you should slash your CEO’s salary

A second report has been released indicating sky-high salaries don’t guarantee a great leader.

Why you should slash your CEO’s salary
Companies may be reconsidering their compensation schemes after a second report was released this week highlighting the shortcomings of the highest-paid CEOs.

Statistical analysis released by employee review site Glassdoor has revealed an undeniable link between the highest-paid CEOs and those with the lowest approval ranking.

"No matter how you look at the data, we found a negative link between CEO pay and CEO approval ratings,” confirmed Andrew Chamberlain, Glassdoor's chief economist.

In order to account for size variation between companies, Glassdoor measured pay as a percentage of company assets before comparing it to approval ratings.

Interestingly, employee ratings are at their highest among the CEOs who take home next-to-nothing on an annual basis – often founders who own significant stock.

The scores then dip initially, rise slightly toward the median, and then fall off at a much greater pace as the paydays become more extreme.

The study comes just weeks after an earlier report found that the highest-paid CEOs actually drove less profit for their respective companies.

Carried out by corporate research firm MSCI, the study found that for every $100 invested in companies with the highest-paid CEOs, that figure would have grown to $265 over 10 years.

However, the same amount invested in companies with lower-paid CEOs would have grown to $376 over 10 years.

“The highest paid [CEOs] had the worst performance by a significant margin,” confirmed senior corporate governance researcher Ric Marshall. “It just argues for the equity portion of CEO pay to be more conservative.”

More like this:

Highest-paid CEOs run worst-performing companies

Viacom CEO resigns with $72m settlement 

Top CEO gets world’s best send-off 

Free newsletter

Our daily newsletter is FREE and keeps you up-to-date with the world of HR. Please complete the form below and click on subscribe for daily newsletters from HRD New Zealand.

Recent articles & video

Is it impossible to overcome hiring bias?

Criminal activity outside of work: What HR needs to know

How to handle a toxic, yet talented, employee

Why do many senior managers distrust big data?

Most Read Articles

How to handle a toxic, yet talented, employee

Religion, rugby and contracts

The enigma of employee satisfaction