The Consequences of Being Overpaid

Author: Mendoza College

How much are your worth? And do you consider yourself overpaid or underpaid? And what does that mean for compensation throughout a career? University of Notre Dame professor, Adam Wowak, at the Mendoza College of Business, has new research that shows CEOs who have been overpaid earlier in their tenures continue to receive the largest raises or smallest pay cuts.

Dr. Wowak said, “We found that earlier overpayment could be an indicator of the board’s ingrained perception of a CEO’s skill level. This effect diminishes as CEO tenure advances, however, as boards presumably achieve a better calibration of the CEO’s true abilities and rely less on earlier pay patterns as the benchmark for the CEO’s worth.”

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