Beware underpaid CEOs

If your company’s CEO feels underpaid and underappreciated, you’d better update your résumé.

CEOs who are paid a third less than their peers are four times more likely to announce layoffs within a year, according to a new study from the Rutgers School of Management and Labor Relations. Apparently, the underpaid CEO believes a short-term bump in earnings will get him or her a raise.

And it works.

Rutgers researchers collected data from 140 S&P 500 companies from 1992 to 2014. They focused on consumer staples, financial services and information technology, and tossed out companies with a clear business reason for laying off workers, such as a merger or bankruptcy. They then normalized the data to compare oranges with oranges.

Scholars have known for years that executives always worry about what their peers are earning. Evidence suggests that executives make risky management decisions specifically to boost their pay or compensation from stock options. Angry workers often accuse CEOs of laying them off to benefit themselves.

But does jealousy or envy play a role?

“Research suggests CEOs view compensation as a symbol of prestige and status. Even with a seven- or eight-figure salary, they might feel slighted if they are earning less than executives at other firms,” said Scott Bentley, who led the study as a doctoral student at Rutgers and now serves as an assistant professor at