Explaining Attitudes toward Executive Pay: Evidence from a Survey Experiment

ABSTRACT

This paper examines the effects of several factors, including performance, on attitudes toward high executive pay. We ask: would people agree on whether a CEO’s pay is too high or too low, fair or unfair, and right or wrong, if they could be more certain than typically possible regarding a CEO’s relevant contributions? Using data from a population-based survey experiment (N = 1,170), we find that the effects of a CEO’s inputs are small next to the effects of predispositions (e.g. core values people bring to the issue), with implications for how pay at the top is justified.

KEYWORDS:

• Income inequality
• attitudes
• distributive justice

Acknowledgments

The authors wish to thank David B. Grusky, Michael J. Rosenfeld, Cristobal Young, Paul Sniderman, Michael Tomz, Michelle Jackson. A previous version of this paper was presented at the RC28 Summer meeting in Columbia University, New York.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. For the financial performance ratings, a Kruskal-Wallis H test showed that there was a statistically significant difference in ratings between the three experimental groups (χ2(2) = 539.238, p = .0001), with a rank sum of 119,818 for low performance, 206,181 for average performance, and 356,697 for high performance. A Dunn’s test shows that experimental groups are significantly different from one another. This suggests financial performance was successfully manipulated. For the job creation ratings, the Kruskal-Wallis H test again showed that there was a statistically significant difference in ratings of contribution to the job market between the three experimental groups (χ2(2) = 594.685, p = .0001), with a rank sum of 120,376 for job losses, 227,893 for the baseline condition, and 334,426 for job creation. A Dunn’s test shows that experimental groups are significantly different from one another. These results suggest that the company’s contributions to the job market were also successfully manipulated.

2. In additional models not shown, we tested for interaction effects between the various treatment variables and found no major patterns. For each of the four outcome variables, we ran six models testing interaction effects between each pair of treatments: founder with performance, founder with jobs, low performance with jobs, high performance with jobs, low jobs with performance, and high jobs with performance. In all of these models, we found only one statistically significant interaction: the effect of the company having had financial losses on whether people feel John Hall’s pay is too high is significantly larger when he is described as the founder and CEO rather than just the CEO.

Additional information

Funding

This research was fully supported by an Early Career Scheme (ECS) grant from the Research Grants Council of the Hong Kong Special Administrative Region, China [Funding Reference No: LU 23601615].

Notes on contributors

Esra Burak

Esra Burak is an independent scholar in Hong Kong. She was an Assistant Professor of Sociology and Social Policy in Lingnan University at the time of writing this article. She studies income inequality, distributive justice, and attitudes. She received her PhD in sociology from Stanford University.

Erin Cumberworth

Erin Cumberworth is a Postdoctoral Research Affiliate at the Stanford Center on Poverty and Inequality. Her research focuses on poverty, inequality, social mobility, and public policies related to poverty and inequality.