Who's overpaid and underskilled?
A study of CEO pay and skill by professors Robert Daines, Vinay Nair and Lewis Kornhauser, of Stanford University, the Wharton School and New York University, respectively, has found little evidence of high skill among CEOs at big firms. Moreover the research also found evidence that pay and skill are negatively related in the performance of big firms in industries constrained by business environment factors.
However, highly paid CEOs in large companies tend to be more skilled than their counterparts in small firms, especially when there are large shareholders and CEOs have a large incentive element in their pay.
Another, less official, study into CEOs in the US was conducted by author Malcolm Gladwell for his book Blink: the power of thinking without thinking. He polled about half of the Fortune 500 companies and discovered that their average height was just under six foot, three inches taller than the US average. Almost one third was taller than six foot two inches, compared with just 3.9% of the general population. With no proven link between height and skills, it's little wonder the professors' report has show some discrepancies.
Among the most overpaid and least talented chief executives pinpointed in their report, which analyzed data between 1991 and 2002, are two AT&T CEOs, Robert Allen and Michael Armstrong, and Exxon Mobil CEO Lee Raymond.