The More CEOs Make, The Worse They Treat Workers, Says A New Study

CEO pay has been blasted for increasing risk to the economy, being out of proportion to ordinary wages and being unrelated to actual company performance. And, according to a new study, a high salary may actually make your company's CEO meaner. (Hat tip to Harvard Business Review)

In the study's white paper, "When Executives Rake in Millions: Meanness in Organizations," professors from Harvard, Rice and the University of Utah argue that rising income inequality between executives and ordinary workers results in "power asymmetries in the workplace such that top executives come to view lower level workers as dispensable objects not worthy of human dignity."

To test this claim, the authors examined employee data from Kinder, Lydenberg, Domini & Co. Comparing employee complaint information against compensation figures, the authors found that the higher a firm's executive pay, the higher its overall "meanness" score. (Firms were given points if they have been fined for mistreating employees and they had points taken away if they have programs that benefit employees such profit-sharing agreements.)

In the laboratory section of the study, the professors asked 62 college students to solve a puzzle and then told them that, based on their relative performance, they would be assigned the role of either "manager" or "employee."

Unknown to the students, all were given the title of manager but were randomly assigned to be either a low-income or high-income manager. Each student was informed that their low-income or high-income assignment was linked to their performance on the puzzle. Professors then told both the low-income managers and the high-income managers that their supposed "employee" had delivered average results on subsequent tasks.

Asked whether they wanted to retain or fire their employee for the final round of puzzles, high-income managers were more likely to fire their employees than low-income managers.

The authors state that they are "amongst the first to examine both theoretically and empirically, the link between high compensation and power."

Check out the study HERE:

When Executives Rake In Millions

Comments

[Venicelady]

03:18 PM on 09/01/2010

This is something new?

When did anyone ever become ultra wealthy by being a "nice guy"?

So much for a "classless" society in America- there will only be two. Very rich, and very poor.

[xrepublican]

10:22 PM on 07/11/2010

Where do you think all that money paid to execs comes from?!?!? The 'productivity increases' that come from firing staff and overworking those that remain goes to the higher-ups, NOT those doing all the work.

Those that can grab the most, do so. In dog-eat-dog capitalism, it's everyone for themselves.

Working on Wall Street in the 80's I saw EVP's screw $20-30k a year clerks out of a $2,000 bonus (a big part of the earnings for the peon class) so the higher-ups could keep their multi-MILLION dollar bonuses.

[Venicelady]

03:38 PM on 09/01/2010

A friend of mine had worked her way up to a Senior V.P. position at Lehman.

So much of what you are saying is true, according to what I've heard from her.

It's definitely dog-eat-dog capitalism. The winners are those at the top rungs of the ladder. Avarice trumps all, and yet we hold these people up as modern day heroes, for some reason.

[Linna Ky]

01:51 AM on 07/09/2010

This is really interesting. However, I have some doubts whether the above studies focus on private companies only or not. Was it applied on the NGOs? There are some more indicators that can prove the meaner of the CEO, for example, like the nationalities of the CEO, gender or even the personalities of the CEO. To some extent, mean can be good in terms of the company's benefit and this is what the best CEO need to care once the company is in the crisis period...

[4Tees]

07:49 PM on 07/08/2010

Just another way that too much wealth causes most to loose touch with reality and humanity

[zuzuzpetals]

12:31 AM on 07/08/2010

"A rich man is a scoundrel or the heir of a scoundrel"
......Old Spanish Porverb

[Old Claudius]

09:28 PM on 07/07/2010

The researchers proved in their laboratory what Congress is daily proving empirically, that the higher the pay and the more the perqs, the nearer to gods and the farther from human the over-paid and perq'd become.
What needs be done is cut congressional pay and benefits, and Wall Street executive compensation packages, to what poverty-line constituents have to make it on. With, for Congressmen, their pay going unemployment benefits during times the House and Senate are not in session.
This plan to be put in effect immediately, and continued until payments of the differences between the pay for each permitted by this plan and what both have been getting before the plan, being entirely applied to the national debt, shall have paid the national debt full down.
With this plan we should be able to at least get the national debt paid, even if it fails to teach the banksters and the bunksters anything.

[CanadianBeef]

02:22 PM on 07/07/2010

Japanese firms have long understood that a manager is a member of the team and has never compensated them like gods. When you give someone four, six, or ten times their annual salary as a bonus, just because the company didn't go bankrupt last year, you are sending a message. That's what happens on Wall Street, and the message is, "You are the Masters of the Universe."

[jmdziuban1]

02:53 PM on 07/07/2010

They only get a 2xSalary "retention" bonus if the firm loses money. You must retain the management which loses, because they are the only ones who fully understand the mistakes that were made.

[petef59]

09:36 PM on 07/07/2010

No one else is capable of figuring out the mistakes made? Sounds a little incestous and arrogant.

[vlm1948]

01:36 PM on 07/07/2010

And the more corrupt.

[John Denton]

12:17 PM on 07/07/2010

The article has a causal problem. The fact is, the mean ones, who are willing to step on others and who preach the almighty bottom line over all else, are promoted. They don't just turn mean when they get more money, silly.

[sheila]

04:22 PM on 07/07/2010

how do you explain the college kids, then? they hadn't worked their way up to anything other than a short-term random assignment of status...

[valkyre]

09:06 PM on 07/07/2010

I agree, this makes this study more interesting...attempts to solve the modern day chicken-egg - do sociopaths become CEO's and hedge fund managers or do the powers they are given in these roles turn maybe only mildy disfunctional people into sociapaths?

[nothingchanges]

11:15 AM on 07/07/2010

"He who is greedy, is always in want" Horace

"Poverty wants much, but avarice, everything" Publilious Syrus

"Madness is badness of spirit, when one seeks profit from all sources" Aristotle

"The love of money is the root of all evil" Timothy 6:10

"Every evil, harm and suffering in this life comes from the love of riches." Catherin of Siena

"Power corrupts, absolute power corrupts absolutely" Lord Acton

"The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living and the get-rich-quick theory of life." Theodore Roosevelt

And then.....

"We need an energy bill that encourages consumption" George W. Bush

So much for the theory of evolution...........................

[1man1voicenovote]

11:05 AM on 07/07/2010

300,000,000 citizens are each individual flickers of hope in this country...

BUSH'S 1000 points of light was created by stealing 299,999,000 tiny dreams, hopes and joys and giving them to his 1000 closest friends.

[GranE]

11:02 AM on 07/07/2010

I think the study misses the connection between Boards of Directors and CEO's, or maybe that's their next study plan. It is always good to look at who sits on a board as they are often without experience of what they are directing, hence they hire CEO's who don't either. In the mid '80's managers advanced in organizations because they could present beautiful spreadsheets to prove their position. The directors had no computer skills so they didn't question the guy and they advanced the best argument. This created more power colonies within the organization who constantly challenged information and led to CEO = CYA with the help of their hired auditing firm.

At the same time, T. Boone Pickens was looking at organizations who didn't control the majority of their own stock and raided them, taking control. Hence CEO stock options started rising as a way to retain stock. Companies realized that they were also matching employees 401K contributions with stock thereby making employees as a group more powerful. Then came the routine purge of gray hair who are forced to turn over their stock on seperation.

Computerization was the beginning of the information age but it was also the beignning of pretty boys with a pretty spreadsheet and bosses who didn't understand about hidden cell formulas in same. ....that's when the fight started.

[chichel]

01:13 PM on 07/07/2010

Yes! CEOs serve on the Boards of Directors of other companies. CEOs are setting CEO salaries and compensation packages. You scratch my back, I'll scratch yours, so the saying goes.

[CanadianBeef]

02:11 PM on 07/07/2010

They scratch with solid gold scratchers.

[mendelcrosses]

10:54 AM on 07/07/2010

This article is 3 decade late.
They actually pay CEOs to get mean. Thats the definition of a CEO now-a-days
Just ask those who have attended interviews for managerial jobs. You increase your chances of getting the job when you proof how mean you can be

[1man1voicenovote]

11:18 AM on 07/07/2010

Bush said kinder and gentler three decades ago...

Like a spider to a fly.

[farmerlady]

08:53 AM on 07/07/2010

You have to be a little psychotic to want millions and millions of dollars in the first place, People who are psychologically healthy know that, at any one time, you can only sleep in one bed, live in one house, and eat the food of one person. So why have a hundred times more than one any person needs? You need to be a little psychologically "off" to want it that badly.

The extremely wealthy people I know have terrible inferiority complexes and this drives their insane competitiveness--it's not about the material things, which they often don't really enjoy, it's about winning and letting the world know about it. They get pleasure from believing that others admire and envy them (and they insist on this all the time, in every conversation), and from the power they have to hurt people. They are not interested in being genuinely liked---toadyism is enough (perhaps they don't know the difference?)

They won't be friends with well balanced people who have intact boundaries or who can say "no" to them (especially their romantic partners). They jettison such people. They have no interest in reality, in that sense.

What really surprises me is that all rich people I have met are like this--even the ones who have inherited money. I don't have an explanation for it.

[Jennifer Hill]

09:02 AM on 07/07/2010

I especially like this part - you can only sleep in one bed, live in one house and eat the food of one person.

Our culture gives people this power because we believe "doing well is doing good" (The Corporation).

A sad substitute indeed the common good.

[Scoppertop]

09:15 AM on 07/07/2010

The explanation is a patriarchal society.

[Tim303]

08:30 AM on 07/07/2010

Yes