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