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It is safe to say that earning high salaries won’t earn leaders approval from employees.
A study from Glassdoor- “What Makes a Great CEO?” revealed that highly paid CEOs earn low approval ratings from their employees, while lower-paid company leaders earn significantly higher praise.
Glassdoor analysed 1.2 million CEO approval ratings from current and former employees from more than 800 pubic companies in the United States.
High CEO pay didn’t predict better approval ratings by employees, but lower ones. “No matter how you look at the data, we found a negative link between CEO pay and CEO approval ratings,” said Dr. Andrew Chamberlain, chief economist of Glassdoor who co-authored the study.
The authors did not explain why employees are disapproval of CEO with fat pay cheques but found that company culture plays a crucial role in winning employees over. The study found that the higher employees rank their company on senior leadership, advancement opportunities and compensation and benefits packages, the more likely they are to give high approval ratings to their CEO.
“Employee opinion of the CEO can be very telling about a company, and Glassdoor data confirms there is a direct link between how employees view their CEO and how they feel about their company culture. CEOs and leaders who cultivate a strong company culture, offering career advancement opportunities for employees and management training for strong senior leaders, will typically gain more approval from their employees,” said Chamberlain in a press release.
With no surprise, the study also found when a company is performing well financially, its CEO enjoys a higher approval rating. The study’s authors said this suggest that employees credit their company leader for good financial performance, though the inverse is also possible when a company is doing well financially, employees may be more likely to approve of their CEO’s leadership.
“There is a strong link between employee sentiment and a company’s financial performance. This study further confirms that more satisfied employees lead to better financial performance and stock returns. Now we see the specific tie between the bottom line and perception of the CEO,” added Chamberlain.
Beyond pay, the study examined the impact of various CEO characteristics: age, education, gender, tenure and how the CEO came to be the company’s leader (external hire, internal hire or as the founder).
Overwhelmingly, one of the biggest drivers of a high CEO approval rating is whether a CEO is also the founder of the company, predicting a statistically significant 3.2 % increase in approval. CEO age, gender, education, and tenure on the job each had no effect on CEO approval.
The study had provided relevant findings on how leaders can boost productivity and staff morale but at the end of the day, leaders need to be clear with themselves, am I held accountable to the board or my employees? How should I strike the right balance?
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