High CEO pay linked to lower approval ratings, study says

Highly paid CEOs have significantly lower CEO approval ratings, according to a new study of publicly traded companies. And, interestingly, low employee ratings around work-life balance tend to correlate to higher CEO approval ratings. While employee sentiment around culture, senior leadership, career advancement, and compensation and benefits have some statistical significance around higher CEO approval, other characteristics like gender, age, education and job tenure do not.

The study, What Makes a Great CEO?, conducted by Glassdoor, a jobs and recruitment marketplace, looks at large, publicly traded companies in the U.S. and reveals the factors that ultimately drive employee perception of CEOs.

Key findings include:

    CEO pay matters: Higher CEO compensation is statistically linked to lower CEO approval ratings on average. However, that effect is lessened when company culture is better.

    Company culture matters: A satisfied workforce is an essential driver of CEO approval ratings on Glassdoor. Three aspects of company culture matter most:   

• Opinion of senior leadership;
• View of career opportunities; and
• Quality of compensation and benefits packages.

    Work-life balance is an exception: Surprisingly, one aspect of company culture is negatively related to CEO approval ratings: Work-life balance. Low satisfaction with work-life balance predicts high CEO approval. Although many workers value work-life balance, they appear willing to sacrifice it in exchange for great CEO leadership.

    Founders matter: CEOs who are also their company’s founder predicts significantly higher CEO approval ratings than being an externally hired or internally promoted CEO.

    Performance matters: CEOs of more profitable companies receive higher approval ratings on Glassdoor, even after statistically controlling for the impact of other factors such as industry and company size.

    Gender and other personal characteristics matter less: Gender, age and education of CEOs have little effect on CEO approval ratings once other factors are accounted for.

“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 Dr. Andrew Chamberlain, chief economist of Glassdoor Inc. “And there’s no doubt about it — employees who are more satisfied are going to be more productive, impacting the bottom line.”