Here's What Makes a Great CEO According to Employees
New research from Glassdoor, a website where employees can anonymously review their companies, shows that employees define what makes a great CEO based on multiple factors.
Glassdoor’s study looked at large, publicly traded companies in the U.S. and found four broad categories that contribute to a CEO’s approval rating: CEO compensation, work-life balance satisfaction, founder versus outsider CEO and company performance.
From an industry perspective, real estate CEOs have the most favorable approval ratings, followed by construction, information technology, finance and insurance.
High CEO Compensation Negatively Impacts CEO Approval
Higher pay for a CEO predicts a lower approval rating, according to the research. New rules that will go into effect in 2017 require that public companies have to disclose the ratio of CEO compensation to median worker pay. The new rules are meant to improve transparency among America’s corporations.
Glassdoor found that all else being equal, higher CEO compensation dictates a lower approval rating.
An extreme example of this includes Facebook (NASDAQ:FB) CEO Mark Zuckerberg who draws $1 for his salary. He ranks in the top ten of Glassdoor’s highest rated CEOs currently. Marc Benioff, the CEO of Salesforce (NYSE:CRM) in April of this year announced that he was freezing his salary at a base salary of $1.55 million. Benioff did this after hearing complaints from investors that his pay package was too high. He ranks at number six on Glassdoor’s current list of highest rated CEOs.
However, Glassdoor did find that a good company culture reduces the negative effect of having a high CEO pay package.
Lower Work-Life Balance Leads to Higher CEO Approval Rating
While it might sound contradictory, Glassdoor found that a decrease in work-life balance translates into a 2.9% increase in CEO approval rating. The research suggests that employees “may be willing to sacrifice work-life balance for purpose-driven work and a visionary, inspiring leader.”
Fast growing companies with high achieving workplaces were cited by Glassdoor’s report as having high rated CEOs with low work-life balance.
Founder CEOs Boast a Higher Approval Rating Than Their Peers
Glassdoor found that founder CEOs enjoy higher approval ratings than external CEOs. According to Glassdoor, this trend suggests that how a CEO comes to that position is an “important predictor” for being a successful leader.
Glassdoor’s research found that overwhelmingly this characteristic was one of the most significant for a higher approval rating. Age, gender, education and tenure had no effect on CEO approval, according to Glassdoor.
Currently, three of the top ten CEOs on Glassdoor are founder CEOs: Salesforce’s Marc Benioff, Facebook’s Mark Zuckerberg and Ultimate Software’s (NASDAQ:ULTI) Scott Scherr.
A Strong Company Performance Means a Higher Approval Rating
Not surprisingly, a company with strong financial performance comes with a well liked CEO. According to Glassdoor, a one-unit boost in profitability causes a 10.2% increase in CEO approval ratings.