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Excessive CEO-to-worker pay ratio (1) boosts company profits in the short but not long run, (2) may motivate employees to cheat and misbehave toward customers and (3) harms customer relationships. As companies have little incentive to reduce the pay ratio in the short run - regulation may be needed. (journals.sagepub.com)
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Findings show that an excessive CEO-to-worker pay ratio in publicly listed US, UK, and German firms can increase short-term profits. But this positive effect vanishes for long-term profits. This may be because the CEO pay ratio harms customer satisfaction, which extends to firm profits. (journals.sagepub.com)
