THE PAY RATIO OF THE CHIEF EXECUTIVE OFFICER AND EMPLOYEE PERCEPTION AT LARGE PUBLICLY TRADED FIRMS

Pablo Calafiore
Texas A&M University, San Antonio
ABSTRACT
Despite regulatory reforms aimed at increasing transparency, this study finds that the
mandated disclosure of CEO pay ratios has little impact on how employees and job applicants
perceive large publicly traded firms. Since 2018, under the Dodd–Frank Act, U.S. companies have
been required to report the ratio of the Chief Executive Officer (CEO) compensation to that of the
median employee, with the intent of providing stakeholders clearer insight into executive pay. This
paper investigates whether this disclosure influences perceptions of prospective and current
employees by applying a keyword-based search and sentiment analysis algorithm to postings on
leading job-search platforms and online discussion forums. Contrary to expectations, references to
CEO pay ratios were rare, and when present, they did not significantly shape views about applying
for a job or describing workplace culture. These findings suggest that CEO pay disclosure, while
symbolically important for regulators and investors, does not meaningfully affect employee
sentiment. The results align with bounded rationality theory (Simon, 1955) and the notion of limited
salience: most employees prioritize immediate workplace factors over executive pay ratios. For
policymakers, this implies that disclosure requirements alone may be insufficient to drive behavioral
change. For companies, efforts to attract and retain talent should emphasize culture, career
opportunities, and fair compensation.
Keywords: Chief executive officer, pay ratio, employee perception