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Fat Cats and Thin Followers: Excessive CEO Pay May Reduce Ability to Lead

  • Kim PetersEmail author
  • Miguel A. Fonseca
  • S. Alexander Haslam
  • Niklas K. Steffens
  • John Quiggin
Chapter

Abstract

The large discrepancy between the pay of chief executive officers (CEOs) and their subordinates within organizations is attracting increasing attention and controversy. While there is evidence that this pay disparity may be contributing to rises in societal income inequality (and thus the range of associated social ills), there is little understanding of the impact of pay disparity on CEOs’ abilities to effectively lead their organizations. Drawing on the social identity approach to leadership, we argue that as the pay of CEOs increases relative to their followers, these followers will be less likely to identify with their CEOs as “one of us.” This, in turn, should undermine followers’ willingness to be influenced by the CEO: to follow their lead. We discuss two recent studies that provide the first test of these claims. These studies provide archival and experimental evidence that high CEO pay reduces followers’ identification as well as their perceptions that the CEO is a charismatic identity leader. In sum, then, this work suggests that high CEO pay may directly impair their capacity to perform their core function of leading their organization.

Keywords

Leadership Social identity Pay CEOs Followership Salary Compensation Leaders 

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Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Kim Peters
    • 1
    Email author
  • Miguel A. Fonseca
    • 1
  • S. Alexander Haslam
    • 1
  • Niklas K. Steffens
    • 1
  • John Quiggin
    • 1
  1. 1.University of QueenslandBrisbaneAustralia

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