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Higher paid managers care less about non-powerful employees and legal constraints

The salary level of managers affects decision making in companies. ‘Individuals who receive higher salaries are less concerned about the well-being of non-powerful employees and they prioritize higher the profitability of the company and their own financial rewards’, says dr. Jennifer Jordan. Her paper Salary and Decision Making: Relationship Between Pay and Focus on Financial Profitability and Prosociality in an Organizational Context, published in the Journal of Applied Social Psychology, is the next FEB Publication of the Month.

 

The Enron scandal
The Enron scandal

Jordan investigated the relationship between salary and individuals’ focus during decision making. ‘The main topic of my research is wisdom’, says Jordan. ‘It’s about how to use everyday knowledge and apply it to your life. Everyone has ideas about right and wrong. Wisdom means applying this knowledge to decision making.’

Dilemmas

During her recent study Jordan presented morally ambiguous and strategic dilemmas to middle-level managers of a Fortune 200 corporation. ‘These dilemmas were adapted from actual business cases’, says Jordan. ‘For example: a company invests a lot of money in lead processing machinery and they find out that some of the workers are getting sick. They don’t know for sure that the new machinery causes the illness. The question is: do they shut the plant down and investigate the well being of their employees?’

Real world

Jordan found that higher paid managers are less likely to focus on issues related to the well-being of the non-powerful employees and members of the community. ‘To translate it to the real world: we know people have limited decision making capabilities. They have limited time and they have limited abilities to focus on different things. So if managers prioritize an issue low, you might assume they are not including that issue in actual decision making.’

Enron and WorldCom scandals

Individuals who receive higher salaries are also less likely to focus on issues related to legal constraints. ‘I started my research shortly after the Enron and WorldCom scandals, which involved highly paid executives who appear to have believed they were immune to the potential negative consequences of their illegal actions’, says Jordan. ‘I was shocked by how these very smart and experienced people were making decisions that not only ruined the entire company, but ruined their own lives, as well. They ended up going to jail and losing a fortune.’

Power story 

The recent findings of Jordan may explain some of the illegal behavior which caused the Enron and WorldCom scandals. ‘It’s a power story’, says Jordan. ‘Individuals who are higher in the hierarchy of an organisation, who get more salary and have more power, are feeling less constrained by legal issues. They feel invincible. The executives at Enron and WorldCom felt they would never be caught.’

More information 

Dr. Jennifer Jordan
Dr. Jennifer Jordan

Salary and Decision Making: Relationship Between Pay and Focus on Financial Profitability and Prosociality in an Organizational Context

Journal of Applied Social Psychology, 2010, 40, 2, pp. 402-420.

Jennifer M. Jordan

Contact: Dr. Jennifer Jordan

Laatst gewijzigd:06 februari 2014 10:07