How does equity theory explain how workers are likely to interpret the high pay of CEOs?

The issue of executive pay is relevant to pay structure in terms of equity theory. By many comparisons, U.S. CEOs' pay is high. A study by the research and analytics firm MSCI found that among makers of consumer staples, such as food and personal-care products, the highest-paid executive made 123 times more than the average worker in that industry. To assess the fairness of this ratio, equity theory would consider not only the size of executive pay relative to pay for other employees but also the amount the CEOs contribute. An organization's executives potentially have a much greater effect on the organization's performance than its lowest-paid employees have. But if they do not seem to contribute 123 times more, employees will see the compensation as unfair. In a study comparing the pay of rank-and-file employees with executives in various business units, customer satisfaction was lower in units where the difference in pay was greater. The researchers speculated that employees thought pay was inequitable and adjusted their pay to provide lower inputs by putting forth less effort to satisfy customers.