When it comes to excessive compensation, the buck doesn't stop with the CEO. A study entitled "Overpaid CEOs and Underpaid Managers: Fairness and Executive Compensation" published in the September/October 2006 issue of Organization Science reviewed compensation data for 120 corporations over a five-year period and concluded that excessive CEO compensation had direct consequences on the compensation of other executives and on employee retention.
The study found that corporations that overpay CEOs are likely to also overpay other executives. For example, a company paying its CEO 64% above industry benchmarks is likely to also overpay other C-level executives (COO, CFO, etc.) by 26% and overpay even division general managers by 12%.
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