The staggering gap between CEO and worker pay, new research from three business scholars suggests, has left America’s workplaces still more nasty, brutish, and short.
We have today in academia, after 30 years of rising CEO pay, a vast scholarly literature on CEO compensation. Much of this vast literature revolves exaltingly around “pay for performance,” the notion that only “deserving” CEOs should make $20 or $50 or $100 million a year.
Sreedhari Desai, Arthur Brief, and Jennifer George have other interests. These three scholars — from Harvard, the University of Utah, and Rice University — have been exploring the link between executive pay and “meanness.”
Last month, at an international conference in Boston, the three unveiled what their explorations have unearthed. In the process, they may have shifted executive pay scholarly research in a sobering new direction, with much less attention on “performance” and much more on raw naked power.
We already know, from psychological research, a great deal about power. We know, for instance, that environments where some hold far more power than others can “cause even normal people without any apparent prior psychological problems to become brutal and abusive towards those with low power.”
In other words, as Desai, Brief, and George note in their Boston presentation, “exaggerated power asymmetry” can make people with power mean to people without.
Contemporary corporate workplaces, the three researchers continue, regularly display this “exaggerated power asymmetry.” And that asymmetry, they argue, is intensifying as pay gaps between CEOs and their workers have widened.
Desai, Brief, and George believe, simply put, that this greater intensity is making workplaces mean places. The wider the pay gap between CEOs and workers, they postulate, the more “the former become meaner toward the latter.”
How do you test such a proposition? Desai, Brief, and George take two approaches. To establish that higher CEO pay does indeed result in meaner executive behavior to workers, they dive into a unique corporate database that Kinder, Lydenberg, Domini & Co., a Boston-based investment research firm, has been maintaining ever since 1991.
KLD has been tracking how individual corporations go about their employee relations across a variety of benchmarks, everything from the dollars in fines and penalties corporations pay for willfully violating employee health and safety standards to the percent of profit corporations share with their workers.
Desai, Brief, and George crunched this KLD data to come up with an meanness-to-employees rating scale and then matched the resulting individual corporate ratings with CEO pay numbers from 2007, to see if they could find any link between CEO pay and corporate meanness.
But the three researchers didn’t stop there. They also configured a laboratory experiment that had 62 college students playing out games that simulated workplace executive-worker relationships.
The KLD data and the lab games, in the end, would both generate findings that point to the same conclusion. Wide pay gaps between executives and workers, sum up Desai, Brief, and George, enhance the sense of power executives feel and cause them to “objectify lower level employees.”
Or, to put the matter more plainly, “executives with higher income treat employees more meanly.”
Desai, Brief, and George have an elegant scholarly label for that phenomenon: “moral disengagement.” Will their work now “engage” the rest of academia in a debate that treats executive pay as much more than a soulless matter of calibrating pay to “performance”? We should sure hope so.
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.