Income and Immorality: CEO Pay Affects Evaluations of Moral Character and Ethical Norms

The topic of CEO pay has become increasingly prevalent in public discourse. In this paper, we explore whether perceptions that a CEO is relatively highly paid affect evaluations of the moral character of the CEO and of the organisation that they represent. Using a time-separated survey of employees’ perceptions of the pay and moral character of their CEO (N = 306; pre-registered), we found that CEOs who were perceived to be relatively well paid were also evaluated as relatively immoral. Their employees also reported that corrupt behaviour was more normative in their organisation and that they were more likely to engage in counterproductive workplace behaviour. To test the causal role of CEO pay in these findings, we ran two experiments (combined N = 647; one pre-registered) that manipulated a fictional CEO’s pay relative to other CEOs. These experiments revealed that the general public evaluated the highly (versus modestly) paid CEO as more immoral and as more likely to engage in unethical behaviour. They also expected that the highly paid CEO’s firm would have more immoral organisational norms. These findings suggest that perceptions of CEO pay may have reputational costs for CEOs and their firms.