CEOs, the leaders of the corporate world, are generally viewed as the purse-holding decision makers who push their businesses forward toward growth and prosperity. They are the face of the company, and, in cultures where individual performance is valued more than the team as a whole, CEOs are the movers and shakers in innovation and development.
As a result, chief executive officers around the world are rewarded with the same image in mind. On average among companies around the world, CEOs are paid between 50 and 100 times more than average workers. In the United States, the divide is even greater with CEOs earning about 350 times as much.
A closer look, though, has many wondering if these individuals really hold as much power as people think. Is the amount that CEOs are paid worth it?
Tomas Chamorro-Premuzic (Professor at Columbia University and University College London) has some answers.
Good CEOs Shape More Than Culture
An organisation’s culture is often shaped from the top down. Things start with the CEO and trickle down to entry-level workers.
In a study that looked at the CEOs of 32 different technology firms, researchers found that CEOs who are excited and inquisitive are leaders of organizations where employees are take-charge entrepreneurs. CEOs with an intense drive tend to create a corporate culture centered on results, while caring CEOs run a company with an empathetic culture.
These are important factors in a company’s success. However, other aspects can be viewed as even more valuable.
- There is a strong correlation between the CEO’s public reputation and the company’s value and stock prices.
- The psychological profile of the CEO can determine the company’s performance.
- The judgment of the CEO affects nearly every managerial decision, strategic decision and vital process within the company.
Bad CEOs Play a Role, Too
Some of the most famous corporate disasters have stemmed from the poor judgment and ethical decisions made by the leaders. Just look at Enron, HP, Wells Fargo and Merrill Lynch, which are some of the most well-known situations in contemporary business.
CEOs with volatile, antisocial and unpredictable personalities are often at the helm of companies where employees feel less connected and engaged with their employers. As a result, there is less productivity and more turnover. The corporate culture tends to be more negative overall. These companies often have more financial losses.
Beyond the hits that businesses take because of low productivity and lost work, the CEOs who are more narcissistic tend to make payment decisions that give them a greater salary package than more positive and productive CEOs.
CEOs are More Important Than Ever
Over the past 60 years, a look at more than 18,000 firms shows that a CEO’s effect on the company’s performance is becoming even more important. While there is no dynamic shift that has taken place on the workload of the CEO, some feel that the general public and company investors place an increased importance on the role of the CEO.
As this perception (and resulting salary) continues to grow, so can the resentment from employees making far less than the CEO. To create a culture of growth, CEOs need to take the perceived importance from others and put it to practice in their business, showing their employees why they are deserving of their salary and merit.