Study Shows Higher-Paid Executives Are Meaner

By Donald Sears  |  Posted 2010-06-30 Print this article Print

A study by researchers at Rice, Utah and Harvard universities has discovered that the more an executive is paid, the more inconsiderate of others and mean that executive happens to be.

From 1990 to 2005, the average CEO saw salaries increase by 300 percent. How has this influenced executives? The study links power to meanness and shows direct relationships between the affect of increasing wealth on power behavior.

The study is really two studies: The first one looks at "relationship between the total compensation of an organization's CEO and the organization's relationship with its employees" based on interviews taken from 251 companies in 2007. The other was a lab experiment using students who were asked to solve anagrams, then they assigned either manager or employee designations based on how they did on the anagrams. Some managers were put in a high-level compensation category, and some were put in a lower-level compensation category.

[F]irm age and ROA [Return on Assets] had a positive, significant influence on meanness whereas firm size had a negative influence. Of greatest importance, the hypothesized main effect of CEO compensation was significant... Our finding suggests that the higher the level of CEO compensation, the meaner the behavior of the organization toward lower-level participants.

Gender had a significant main effect on power such that men perceived higher levels of power... as compared to women . More importantly, as predicted, higher relative compensation of manager resulted in greater perceptions of power... compared to low relative compensation of manager.... We then conducted a hierarchical, logistic regression analysis on meanness... we found the hypothesized direct effect of relative compensation of manager on meanness such that higher relative compensation of manager lead to more meanness. On introducing the mediator..., the direct effect of relative compensation of manager became considerably smaller and insignificant whereas indirect effect of perceived power was significant, thereby suggesting the perceived power fully mediated the relationship between relative compensation of manager and meanness.

Suggestions for remedies by the researchers include:

  • Disentangling board and executive interests
  • Divorce]ing remuneration consultants and auditors from CEO
  • Increased disclosure and shareholder rights
  • Capping the excess
  • Progressive taxation
  • Linking pay to charity
  • Empowering lower level employees
  • Public outcry and media attention
  • Considering the fight over Wall Street regulation going on in Congress right now, I doubt meanness is being considered. Perhaps a meanness study of U.S. politicians is in order too? |

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