Political Beliefs and CEO Pay

During the creation of my blog post on the next generation of women leaders, I’d expected the dawning of a new era for women leaders, and with this in mind, I wrote about the obstacles that women leaders face after they’ve made it to the top. But, despite predictions, our nation’s highest glass ceiling was not shattered last November. Of course, that post still applies to women CEOs around the world, even if not to our president-elect. Regardless of personal politics, it is obvious that the race to win the position of America’s CEO illustrated some intriguing differences between what Republicans and Democrats value in their leaders. If we wanted to drastically simplify the aims of each party, we could simply look to their candidates’ books. For instance, the title of Hillary Rodham Clinton’s It Takes a Village says it all: today’s Democrats cherish social justice and equality. Likewise, Donald Trump’s titles The Art of the Deal and How to Get Rich could provide a snapshot of what today’s Republicans prize: individualism and free markets. So while some of us were outraged when Trump’s response to Clinton’s observation that he had rooted for the housing crisis was, “That’s called business,” others of us thought such a stance denoted strong leadership.

According to Abhinav Gupta and Adam J. Wowak’s 2016 article “The Elephant (or Donkey) in the Boardroom: How Board Political Ideology Affects CEO Pay,” this diverging of ethos isn’t confined to the political realm. In fact, the business decisions made by a company’s board are just as tied to ideology. And when it comes to leadership and compensation, research shows that conservatives tend to hold the CEO responsible for a company’s success, and so they pay him or her in a way that reflects that perceived worth (i.e.: more). Liberals, on the other hand, tend to believe that the company’s success comes from a team effort—it takes a village—and the company’s spending, including the CEO’s paycheck, reflects that feeling (i.e.: the CEO is paid less). Perhaps this contributes to the fact that, according to CNBC, “the average pay for an S&P 500 CEO was $12.4 million in 2015, or 335 times the pay of a rank-and-file worker, according to a new report from the AFL-CIO,” a wealth disparity Trump’s proposed tax cuts would buoy if implemented.

This finding leads us to why conservatives might have assumed that Trump was the right man for the job: He’s rich (and he’s not afraid to brag about it. Though just how rich is still unclear). And surely he must be rich because he’s a good CEO (“good” as defined by conservatives), and if he’s a good CEO, he must be worthy of not just the corner office but the Oval Office.

Herein lies the double-edged sword—or the potential for just deserts, depending on where you lie on the political spectrum. Unlike liberal-leaning boards, which hold a CEO responsible but also take into account issues of social welfare and circumstances outside the CEO’s control, conservative board members tend to evaluate the CEO on delivery above all else. And since Trump claims that “[he] alone can fix it,” citizens will be expecting the new CEO to deliver on his promises—to make America strong again, to make America proud again, to make America safe again, to make America great again, and to make all of our wildest dreams come true.