Employee satisfaction and CEO pay-performance sensitivity

Heung-Jae Jeon

Research in International Business and Finance, 2025, vol. 77, issue PA

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.

Keywords: Employee satisfaction; Pay-performance sensitivity; CEO entrenchment; Agency problem; Executive compensation (search for similar items in EconPapers)
JEL-codes: J33 J53 M12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001394

DOI: 10.1016/j.ribaf.2025.102883

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