Human Resources



Pay gap

CEOs are willing to take pay cuts to work for top brands

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Here’s another reason why HR leaders should make employer branding a priority in organisations today – the temptation top brands provide for CEOs.

Research from London Business School found CEOs are prepared to take a substantial pay cut to work for top well-known brands.

A team led by Nader Tavassoli, professor of marketing, London Business School, compared compensation figures of 2,717 US senior executives, with the brand strength of their firms’ leading products over a 10 year period.

It found CEOs were prepared to take a 12% pay cut, equivalent to an average of $1.3million per year, in order to work for top brands.

Tavassoli and her team also found that the higher the perceived strength of identification between the brand and executive, the greater the executive’s willingness to accept lower pay.

ALSO READ: Why Unilever’s CEO is “ashamed” of his pay

“Strong brands can provide a competitive edge when negotiating with prospective employees. A well regarded brand can do more than just helping to recruit the best leadership talent – with pay accounting for the largest cost in many organisations, it can also benefit the bottom-line by lowering payroll,” Tavassoli said.

“HR teams should therefore leverage brand equity as much as they would more-traditional benefits.”

The study also found that younger executives were more likely than older executives to take a salary-hit in order to work for a strong brand.

This was mainly due to the effectiveness of such brands to boost résumé power.

“Firstly, younger executives have fewer building blocks to define their identity which makes their equity transfer from their current employer particularly valuable,” the report stated.

It added such younger staff are therefore willing to invest in their identity because future employers may rely on the brand association as a credible indicator of human capital.

As younger executives have long careers ahead of them, they were also likely to have greater opportunities to leverage this equity for social or economic gains.

“Younger executives should value brand equity transfers more than older executives when looking at their careers and negotiate their salaries accordingly,” Tavassoli concluded.

Image: Shutterstock

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