More On CEO Compensation
INFORMS – A new study says that if a CEO’s pay is bloated, the rest of the upper division managers will be bloated as well.
However, the researchers found that CEO pay has direct consequences for compensation at lower employee levels. That’s because the effects of CEO overpayment cascade – at diminishing degrees – down to subordinates. For example, based on their models, where one CEO was overpaid by 64 percent, individuals in his/her company at Level 2 (COO, CFO, etc.) were overpaid by 26 percent, while individuals at Level 5 (division general managers) were overpaid by 12 percent. The cumulative effect of this systemic overpayment impacts overall organizational performance and shareholder value.
The full paper isn’t out yet, but I’m hoping they’ll put a dollar amount on how much that bloat is costing the economy.
-Shlok
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