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Employee satisfaction and CEO pay-performance sensitivity

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  • Jeon, Heung-Jae

Abstract

This paper investigates the impact of employee satisfaction on CEO pay-performance sensitivity within a sample of S&P 1500 firms with an enough number of Glassdoor.com employee ratings. The results indicate that an increase in employee satisfaction is associated with a higher level of CEO pay-performance sensitivity, with this effect being more pronounced when there is a greater likelihood of CEOs being entrenched. These findings align with the notion that heightened employee satisfaction can create uncertainty among shareholders regarding the CEO’s motivations. Consequently, this study contributes to the existing literature on agency problems and the ongoing discourse surrounding employee welfare, supporting optimal contracting theory.

Suggested Citation

  • Jeon, Heung-Jae, 2025. "Employee satisfaction and CEO pay-performance sensitivity," Research in International Business and Finance, Elsevier, vol. 77(PA).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001394
    DOI: 10.1016/j.ribaf.2025.102883
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    More about this item

    Keywords

    Employee satisfaction; Pay-performance sensitivity; CEO entrenchment; Agency problem; Executive compensation;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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