The CEO of Salesforce, Mark Benioff, reportedly makes over $33 million. Robert Iger, the CEO of Walt Disney Company earned nearly $45 million in 2015. Yahoo’s Marissa Mayer earns over $35 million in spite of her company’s struggling profits.
Those are pretty big CEO paychecks. And aside from making the rest of us feel pretty broke, transparency around how much a CEO earns has real practical application to your day-to-day worklife. According to new research from Glassdoor’s chief economist Dr. Andrew Chamberlain, the best-paid CEOs are not necessarily beloved by those they employ.
In a new study, Dr. Chamberlain writes, “Higher CEO compensation is statistically linked to lower CEO approval ratings on average. However, that effect is lessened when company culture is better.” Glassdoor provided the first-ever statistical analysis of Glassdoor’s CEO approval ratings data to uncover which key factors are the main statistical drivers of high CEO approval ratings.
There has been a marked rise in average CEO compensation in recent decades. According to additional Glassdoor research, in 2014 the average CEO earned a whopping 204 times median worker pay among S&P 500 companies. Research shows part of the recent increase in CEO pay is due to merit: improved CEO performance and the growing global impact of today’s companies. However, some is also due to managerial power—simply put, the ability of CEOs to give themselves a raise. These trends have sparked a growing debate about executive pay.
And the debate now continues as the connection between CEO pay and employee approval within public companies becomes more evident. Here’s why it should matter to you:
1. Use CEO pay and approval ratings on Glassdoor to help you determine if a company is a good fit for you.
A satisfied workforce is an essential driver of CEO approval ratings, so don’t skim over that percentage ranking on an employer’s profile. Research recent articles about the company's leader like whether they have been consistently voted one of the highest ranked CEOs according to employees or if they are a founder-CEO, which, is a perk. CEOs who are also their company’s founder predict significantly higher CEO approval ratings than being an externally hired CEO. This “founder effect” means that they are viewed significantly more favorably by employees because in part, according to Chamberlain, founders are really good at constantly reinforcing the mission and the big picture of the company. Founders "do this instinctively because that company is like a child to them." This translates to inspiration, especially when times are tough. Founder CEOs are inspiring to their workforce and this can be an attribute job seekers look for in a company.
[Related: The Formula for Being A Great CEO]
2. A low approval rating may indicate a prickly company culture.
If you’re browsing company profiles and notice that a CEO has a low approval rating, don’t panic or pass up your dream job. Do more digging into the company culture and feedback on the CEO. Three aspects of company culture matter most when it comes to how employees rate a CEO: Opinion of senior leadership; view of career opportunities; and quality of compensation and benefits packages.
3. CEO’s who take large paychecks in spite of company health may be a red flag.
“Lower-paid CEOs receive the highest approval marks, while the highest-paid CEOs receive the lowest average approval ratings. However, the relationship is complex and noisy,” writes Chamberlain. He goes on to explain that high pay isn't necessarily bad if it's on par with the company culture. However, when it's out of line with the culture and earnings, as in the case of Yahoo, that may be a red flag.
4. If your company's CEO takes little to no pay, this doesn’t mean she/he is perfect.
Conventional wisdom among executive experts investors is that CEOs make the best decisions when they have the most skin in the game. That’s why big portions of the compensation packages for the highest-paid CEOs come in the form of stock and stock options. However, our research shows an additional data point. “CEO approval is influenced by many factors other than executive pay. For example, having better corporate culture alleviates the negative impact of CEO pay on approval ratings.”
TELL US: What do you think your CEO earns each year? Is it fair? Tell us on Facebook @Glassdoor.