The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Many are talking about this New Yorker piece by James Surowiecki (for example, see this Cooley blog). Here’s an excerpt:

At root, the unstoppable rise of C.E.O. pay involves an ideological shift. Just about everyone involved now assumes that talent is rarer than ever, and that only outsize rewards can lure suitable candidates and insure stellar performance. Yet the evidence for these propositions is sketchy at best, as Michael Dorff, a professor of corporate law at Southwestern Law School, shows in his new book, “Indispensable and Other Myths.” Dorff told me that, with large, established companies, “it’s very hard to show that picking one well-qualified C.E.O. over another has a major impact on corporate performance.” Indeed, a major study by the economists Xavier Gabaix and Augustin Landier, who happen to believe that current compensation levels are economically efficient, found that if the company with the two-hundred-and-fiftieth-most-talented C.E.O. suddenly managed to hire the most talented C.E.O. its value would increase by a mere 0.016 per cent.