mb -
(Can you say, "control group"? While it is received wisdom that good management increases shareholder value, I've never heard of a convincing study that the $90 million CEO performs better than the $900,000 variety. US CEO salaries implicitly assume that there is a tiny pool of ultra-skilled managers that are a tremendous marginal improvement, and that the Boards of large US firms have found and hired all of them. Improbable, post hoc anecdotes notwithstanding.)
You're only looking at one side of the picture. It has been more than adequately proven that some CEO's totally destroy shareholder value, and others fail to take advantage of a company's opportunities.
While a company might find its best CEO by randomly stopping cars on an interstate exit ramp, it is more likely that a CEO chosen from an experienced pool will at least produce adequate results.
The question goes far beyond 'ultra-skilled'. If you hire a production worker, any error will usually become clear within weeks at minimal cost. In the case of a CEO, you need someone who can effectively adapt and respond to a wide variety of possible unknown futures over a decade and project an air of competence and confidence both inside and outside the company. With the time between hire and visible payback being so long, there is no reasonable expectation of there being any arithmetic ranking correlation between compensation and results in the surviving universe. This in no way reduces the requirement for making the best possible selection based on the available information and intuition.
Regards, Don
P.S. - It apparently turns out that a good part of the $90M is a replacement for abandoned Lucent options. |
