For years, there’s been a worry about the rising gap between what CEOs of companies are paid and what the normal staff members will be paid. While nobody expects everyone to be on the same pay grade at work, some of the pay gaps out there are pretty obscene.
This has gone on for decades, but it’s now beginning to have a dent in the reputation of companies who allow such wide gaps to form. Indeed, according to a study carried out by UC Berkeley, companies with massive gaps in pay from staff to CEO are nowhere as desirable for staff to work for, or for businesses to work with.
This latest study, which was published in the Journal of Experimental Social Psychology, found that people are put off by such obscene pay gaps. If you know that a company treats its top brass with such comfort but leaves its average worker feeling shortchanged, it’s hard to feel good using that company.
According to the lead author of the study, Ariana Benedetti: “Our results indicate that consumers are less interested in purchasing from and getting a job at companies with high CEO-to-worker compensation ratios,”
It would certainly appear so. According to the study, the average pay gap from a CEO to your average staff worker would be around 361:1. That’s insane. However, it can be even higher for those working within a Fortune 500 company: the study shows it could be as much as 10x that previous figure.
This is a kick in the teeth for the concept of ‘trickle down economics’ – why is so much of the trickle staying at the top? Those who took part in the study showed a significant disliking of this kind of thinking.
Indeed, it wasn’t even so much the amount people were making, but the amount made in comparison to employees in the same business.
Another senior author of the paper, Serena Chen, a psychology professor at UC Berkeley, said: “This likely reflects a psychological aversion toward inequity, which develops early in life.
For example, if a CEO makes a great deal of money, but the average worker also makes a good wage, people feel that the wealth is being distributed more fairly and in turn will have a more positive impression of the company.”
Naturally, people are growing a little tired of living in a society whereby there’s so much disparity from the top to the bottom. If the study is right, though, these companies will feel it from the human cost.
They will struggle to employ enough quality staff members, and will also be less likely to forge strong business deal with other companies.
When people find out the responsibility of the average CEO can rarely (if ever) justify such a pay gap, it naturally creates an air of negativity. It’ll be interesting to see if, as more studies like this come out, we see a change in how CEOs are paid – or if the gap will merely continue to widen.