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BERKELEY, Calif. – Companies whose CEOs earn hundreds of times their average employee’s pay are viewed as less desirable to work for, and to do business with, according to a new University of California, Berkeley, study.
Probing a new angle of income inequality, UC Berkeley researchers sought to determine how people would feel about a company once they knew what the top executive made compared to the workers.
Their findings, just published in the online issue of the Journal of Experimental Social Psychology, suggest that the wider the pay gulf, the more negative the perception of the company from the standpoint of potential employees and consumers.
"Our results indicate that consumers are less interested in purchasing from and getting a job at companies with high CEO-to-worker compensation ratios," said study lead author Arianna Benedetti, a Ph.D. student in psychology at UC Berkeley.
The study is especially timely in the face of the Security and Exchange Commission’s new requirement that publicly held corporations disclose their CEO-to-worker pay ratio. The most recent filings indicate an average CEO-to-worker ratio of 361:1. For Fortune 500 companies, the gap can be 10 times wider.
Notably, study participants were more bothered by the disparity between executive compensation and worker wages than by the actual amount people made, suggesting a visceral disapproval of businesses whose profits fail to trickle down the corporate ladder.
"This likely reflects a psychological aversion toward inequity, which develops early in life," said study senior author Serena Chen, a psychology professor at UC Berkeley. "For example, if a CEO makes a great deal of money, but the average worker also makes a good wage, people feel that the wealth is being distributed more fairly and in turn will have a more positive impression of the company."
Public distaste for a gaping CEO-to-worker pay ratio could translate into difficulties recruiting talent and attracting investors and result in lukewarm reviews on crowdsourcing forums like Yelp.
That said, the disparity did not influence study participants’ view of a company’s overall success or ability to innovate. Moreover, negative feelings about companies with large CEO-to-worker pay gaps lessened when they learned more details about a CEO’s actual responsibilities.
How they conducted the study
For a series of studies, UC Berkeley researchers recruited more than 1,000 participants nationwide via Amazon’s Mechanical Turk crowdsourcing platform as well as Bay Area networks.
Among other tasks, participants read a detailed description of a mock company modeled after an actual company. Different participants were presented with different CEO-to-worker ratios ranging from 25:1 to 350:1 so that researchers could see how their evaluations were influenced by high and low ratios.
They then rated the companies based on such measures as employee morale, employee well-being, work-life balance, collaboration, innovation, trustworthiness, global impression and ratio fairness. They also rated their likelihood of purchasing the company’s products and working for the company.
The results consistently demonstrated that a company’s internal morale and external reputation could be positively or negatively influenced by the CEO-to-worker pay gap. Moreover, they reflect real-world data that the researchers collected from the job search Web site, www.Glassdoor.com, that shows a connection between CEO-to-worker-pay ratios and reviews of companies.
"Our study shows that CEO-to-worker ratios really matter to employees and consumers alike," Benedetti said. "These results demonstrate that, now that publicly traded companies have started to disclose their CEO-to-worker ratios, they need to be cognizant of and prepared for the effects such disclosure may have."
Yasmin Anwar writes for the UC Berkeley News Center.
Probing a new angle of income inequality, UC Berkeley researchers sought to determine how people would feel about a company once they knew what the top executive made compared to the workers.
Their findings, just published in the online issue of the Journal of Experimental Social Psychology, suggest that the wider the pay gulf, the more negative the perception of the company from the standpoint of potential employees and consumers.
"Our results indicate that consumers are less interested in purchasing from and getting a job at companies with high CEO-to-worker compensation ratios," said study lead author Arianna Benedetti, a Ph.D. student in psychology at UC Berkeley.
The study is especially timely in the face of the Security and Exchange Commission’s new requirement that publicly held corporations disclose their CEO-to-worker pay ratio. The most recent filings indicate an average CEO-to-worker ratio of 361:1. For Fortune 500 companies, the gap can be 10 times wider.
Notably, study participants were more bothered by the disparity between executive compensation and worker wages than by the actual amount people made, suggesting a visceral disapproval of businesses whose profits fail to trickle down the corporate ladder.
"This likely reflects a psychological aversion toward inequity, which develops early in life," said study senior author Serena Chen, a psychology professor at UC Berkeley. "For example, if a CEO makes a great deal of money, but the average worker also makes a good wage, people feel that the wealth is being distributed more fairly and in turn will have a more positive impression of the company."
Public distaste for a gaping CEO-to-worker pay ratio could translate into difficulties recruiting talent and attracting investors and result in lukewarm reviews on crowdsourcing forums like Yelp.
That said, the disparity did not influence study participants’ view of a company’s overall success or ability to innovate. Moreover, negative feelings about companies with large CEO-to-worker pay gaps lessened when they learned more details about a CEO’s actual responsibilities.
How they conducted the study
For a series of studies, UC Berkeley researchers recruited more than 1,000 participants nationwide via Amazon’s Mechanical Turk crowdsourcing platform as well as Bay Area networks.
Among other tasks, participants read a detailed description of a mock company modeled after an actual company. Different participants were presented with different CEO-to-worker ratios ranging from 25:1 to 350:1 so that researchers could see how their evaluations were influenced by high and low ratios.
They then rated the companies based on such measures as employee morale, employee well-being, work-life balance, collaboration, innovation, trustworthiness, global impression and ratio fairness. They also rated their likelihood of purchasing the company’s products and working for the company.
The results consistently demonstrated that a company’s internal morale and external reputation could be positively or negatively influenced by the CEO-to-worker pay gap. Moreover, they reflect real-world data that the researchers collected from the job search Web site, www.Glassdoor.com, that shows a connection between CEO-to-worker-pay ratios and reviews of companies.
"Our study shows that CEO-to-worker ratios really matter to employees and consumers alike," Benedetti said. "These results demonstrate that, now that publicly traded companies have started to disclose their CEO-to-worker ratios, they need to be cognizant of and prepared for the effects such disclosure may have."
Yasmin Anwar writes for the UC Berkeley News Center.
- Details
- Written by: Yasmin Anwar
SACRAMENTO – Insurance Commissioner Dave Jones announced he has approved a Universal Claims Certification program, or UCC, from Claims and Litigation Management Alliance, or CLM, designed to streamline the licensing process for independent insurance adjusters.
The UCC makes the process of licensing independent insurance adjusters who wish to acquire and manage their independent insurance adjuster licenses in multiple states more efficient.
The UCC does not replace an independent insurance adjuster license, but makes the process of securing a license more efficient. Both licensed and unlicensed individuals can acquire a UCC.
However, unlicensed individuals must first go through an intensive training by completing a 40-hour online pre-certification education program and successfully pass an examination to earn the UCC.
"As insurance commissioner, one of my top priorities is making sure California's insurance market is healthy and vibrant," said Insurance Commissioner Dave Jones. "The Universal Claims Certification process is designed to streamline the independent insurance adjuster licensing process and reduce costs. Also, the UCC program sets requirements for licensees that exceed the requirements under current California law, meaning it requires licensees to complete more continuing education, which greatly benefits the independent insurance adjusters and consumers. When this program was filed, my department worked to expedite approval so independent insurance adjusters would benefit from the efficiency the UCC is designed to provide. I encourage more organizations to develop innovative programs and business models, like this one, to better serve the needs of the California insurance market."
Currently, independent insurance adjuster applicants are not required to complete any prelicensing education.
California's applicants are only required to take and pass the independent insurance adjuster license examination and meet the license requirements to receive an independent insurance adjuster license.
For a licensee to maintain the UCC, the independent insurance adjusters must complete 24 hours of continuing education every two years including five hours of insurance law and ethics.
The UCC program's insurance law and ethics requirement exceeds California's required three hours of law and ethics that is a part of and not in addition to the 24-hour continuing education requirement.
Once independent insurance adjusters acquire the UCC, they will be able to more quickly obtain a license in the states where the UCC is currently approved, including Alabama, Florida, Georgia, Mississippi, Texas, and now California. This will allow out-of-state adjusters to be more readily available when a natural disaster occurs.
"For years, the CLM membership has complained of the tedious state-by-state adjuster licensing process. We first worked to tackle the process of managing multiple licenses with our Tracker product, then we started to work with various states to actually change the licensing process," says CLM Founder and former CEO Adam Potter. "It's exciting to see this work come to life as we launch the UCC."
CLM is an insurance industry association with more than 45,000 members that focuses on education and resources. CLM offers over 300 live courses, events and conferences annually.
The UCC makes the process of licensing independent insurance adjusters who wish to acquire and manage their independent insurance adjuster licenses in multiple states more efficient.
The UCC does not replace an independent insurance adjuster license, but makes the process of securing a license more efficient. Both licensed and unlicensed individuals can acquire a UCC.
However, unlicensed individuals must first go through an intensive training by completing a 40-hour online pre-certification education program and successfully pass an examination to earn the UCC.
"As insurance commissioner, one of my top priorities is making sure California's insurance market is healthy and vibrant," said Insurance Commissioner Dave Jones. "The Universal Claims Certification process is designed to streamline the independent insurance adjuster licensing process and reduce costs. Also, the UCC program sets requirements for licensees that exceed the requirements under current California law, meaning it requires licensees to complete more continuing education, which greatly benefits the independent insurance adjusters and consumers. When this program was filed, my department worked to expedite approval so independent insurance adjusters would benefit from the efficiency the UCC is designed to provide. I encourage more organizations to develop innovative programs and business models, like this one, to better serve the needs of the California insurance market."
Currently, independent insurance adjuster applicants are not required to complete any prelicensing education.
California's applicants are only required to take and pass the independent insurance adjuster license examination and meet the license requirements to receive an independent insurance adjuster license.
For a licensee to maintain the UCC, the independent insurance adjusters must complete 24 hours of continuing education every two years including five hours of insurance law and ethics.
The UCC program's insurance law and ethics requirement exceeds California's required three hours of law and ethics that is a part of and not in addition to the 24-hour continuing education requirement.
Once independent insurance adjusters acquire the UCC, they will be able to more quickly obtain a license in the states where the UCC is currently approved, including Alabama, Florida, Georgia, Mississippi, Texas, and now California. This will allow out-of-state adjusters to be more readily available when a natural disaster occurs.
"For years, the CLM membership has complained of the tedious state-by-state adjuster licensing process. We first worked to tackle the process of managing multiple licenses with our Tracker product, then we started to work with various states to actually change the licensing process," says CLM Founder and former CEO Adam Potter. "It's exciting to see this work come to life as we launch the UCC."
CLM is an insurance industry association with more than 45,000 members that focuses on education and resources. CLM offers over 300 live courses, events and conferences annually.
- Details
- Written by: California Department of Insurance
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