The influence of CEO compensation on employee engagement

M Hendriks*, M. Burger, Commandeur Harry

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

1 Citation (Web of Science)

Abstract

The soaring compensation levels of chief executive officers (CEOs) have spurred an intense debate about its outcomes. This paper examines an understudied outcome in this regard: employee engagement. Using a dynamic panel model with data from 336 publicly listed firms across 26 countries, we find that employee engagement is generally unaffected by CEO (over)compensation. However, negative effects emerge under specific conditions. First, employee engagement declines with negative media coverage about CEO compensation. Second, employee engagement declines with greater CEO (over)compensation in the financial sector, which is a sector with extraordinary levels of CEO compensation and compensation controversies. The findings suggest that a ceiling effect exists, at which point negative effects emerge and employee engagement becomes relevant in determining CEO compensation policies, while the general insensitivity of employee engagement to CEO compensation can help explain the soaring CEO compensation levels.

Original languageEnglish
Number of pages27
JournalReview of Managerial Science
DOIs
Publication statusE-pub ahead of print - 17 Mar 2022

Keywords

  • Compensation controversy
  • EXECUTIVE-COMPENSATION
  • Executive compensation
  • FIRM SIZE
  • Financial sector
  • INEQUALITY
  • Job attitudes
  • MANAGERS
  • Media coverage
  • PANEL-DATA
  • PERCEPTIONS
  • SATISFACTION
  • TOP INCOMES
  • WALL-STREET
  • WORKPLACE

Fingerprint

Dive into the research topics of 'The influence of CEO compensation on employee engagement'. Together they form a unique fingerprint.

Cite this