Are top CEOs underpaid?

There is another lesson from the numbers: CEOs are paid less than the value they bring to their companies. More concretely, CEOs capture only about 68–73 percent of the value they bring to their firms. For purposes of comparison, one recent estimate suggests that workers in general are paid no more than 85 percent of their marginal product on average [Isen 2012]; that difference is attributed largely to costs of searching for workers and training them to become valuable contributors. In other words, workers actually seem to be underpaid by somewhat less than CEOs are, at least when both are judged in percentage terms. Both of those are inexact estimates, but in fact these results are what economic reasoning would lead us to expect. It may be easier to bargain the CEO down below his or her marginal product a bit more, given that the talents of the CEO would be worth much less in non-CEO endeavors.

I find the most convincing estimate of the gap between pay and marginal product to be that of Lucian A. Taylor, at the Wharton School of Business. He finds that a typical major CEO captures somewhere between 44 percent and 68 percent of the value he or she brings to the firm, with the additional qualification that the CEO’s contract offers some insurance value—that is, in bad times for the firm the pay of the CEO won’t be cut in proportion, but the CEO shares to a lesser degree on the upside. That 44–68 percent is therefore a better deal for the CEOs than it may appear at first glance. Still, you won’t find credible estimates suggesting that major CEOs, taken as a group, are capturing more than 100 percent of their value added. Here too, that is what you would expect from a competitive bidding process.

Part of the accompanying footnote: For the 68–73 percent estimate, see Nguyen and Nielsen 2014; for the 44–68 percent estimate, see Taylor 2013… It is a little-known fact that the current use of high-powered financial incentives for American CEOs still has not reattained the level it held in the pre–Second World War period.

That is an excerpt from my Big Business: A Love Letter to an American Anti-Hero, due out next week.


Taylor finds that CEOs bear none (I repeat, none) of the negative surplus from bad news. In other words, CEOs accept about half the surplus from good news in return for downward rigidity in pay.

How does one know that the surplus from good news is attributable to the CEO? Taylor: "Measuring the surpluses from learning presents a challenge, since we cannot directly observe perceived CEO ability, and since compensation and stock prices depend endogenously on perceived ability. These challenges lend themselves to a structural estimation approach,which infers unobservable quantities directly from endogenous patterns in the data. I estimate a model in which the CEO and shareholders gradually learn the CEO’s ability by observing the firm’s profits and an additional, latent signal. Stock prices, return volatility,and changes in the level of CEO pay respond endogenously to news about CEO ability." Supra. Lots of assumptions there.

The protection from downsides is hard to underestimate: Bad leadership sinking companies is more visible in companies that carry more risk, and there the bad leadership, which took away value from the company, tends to come out really well barring outright fraud.

The biggest large company example we can find is Ballmer: The market clearly valued a random, unknown replacement to be worth over a billion for Microsoft (and yes, Nadella is taking Microsoft back into relevancy, so the markets were right). Ballmer was a destroyer of value, not a creator, and yet, he did really well.

We also get to look at Baumann from Bayer: The Monsanto merger doesn't look good, not just for the former Monsanto, but Bayer itself. This is not an insiders-only perspective: You can find it everywhere. Two companies made worse by merging together. What happened to Baumann's value?

We can also look at the AOL Time Warner merger, one of the funniest of all time, which looked really funny even back then. What was the penalty of this loss of value?

Rick Scott was the CEO of Columbia/HCA when it committed massive Medicare and Medicaid fraud, resulting in penalties of about $1.7 billion. Scott lost his job but was punished for his sins with a golden parachute worth $300 million. He moved to Florida, was elected governor twice, and last year was elected to the US Senate. So much for CEOs bearing the negative surplus or even disgrace for their actions, in the latter case CEO worship overriding bad behavior.

You’ve mentioned him before as though he represents a considerable percentage of the CEO demographic. But isn’t he a very unique outlier? I’m not conversant with Florida’s state politics. What caused millions of voters to hold their noses and vote for him on at least three occasions?

CEO worship. I have mentioned Scott a couple of times because I find his ascent in politics after his disgrace as CEO of Columbia/HCA so unlikely as to defy logic. I joke that the fine folks in Florida, many dependent on Medicare, elected Scott governor because of his experience stealing from the federal government, and that he could use that experience on behalf of Florida. By the way, Trump appointed Scott to lead the development of the elusive Republican health care plan.

'a considerable percentage of the CEO demographic'

Well, depends on considerable, doesn't it? As noted below, he seems to be solidly in this 8 percent category - ' CEOs who led companies paying significant fraud-related fines or settlements comprised another 8% of the sample. (Most of these settlements totaled more than $100 million.)'

Of course, he might also be in this category too - 'CEOs who were forced out of their jobs made up 8%.'

But let us be generous, and say he represents 1 in 12, and not 1 in 6.

the result of the penalties were worth the cost of the reform of the policy.

Also I think often big companys are also lagging in time. This means that effects of ceo policy often only come apparent when the ceo has already left. This is hard to judge in a study.

Also I agree about the effect of bad news on ceos, it is often negligible.

Well, at least Tyler waited until 10 years after Lehman, AIG, et al to publish this book, and we're at the peak of the current cycle. All you naysayers have gotta admit his timing is pretty good.

To the extent work is a collective endeavor, every worker must be paid below their marginal product. If two workers team up to create a $1 product that neither could have created alone, the marginal product of both workers is $1 but it is impossible to pay both of them $1. That doesn’t make them underpaid, whether they are a CEO or a janitor.

Two workers producing $1 of marginal product are producing 50 cents each.

You are arguing each of a thousand workers making a $50,000 pickup truck used to commute to work have produced $50,000 in revenue, because without the $20 wiring from a Mexican supplier, laced by one worker after five others cut, and laid into the jig, and into connectors, all the wires, the truck would not exist.

MBAs argue that they alone deserve all the $50,000 because they theorized that splitting manufacturing up into thousands of contracts in multiple nations and offering easy credit would lead to more sales at $50,000 for what was 50 years ago a 2020$ 30,000 truck with $1000 in frillls, plus $5000 in credit risk that the government will bailout to prevent a million jobs lost in hundreds of US businesses, plus recessions in dozens of nations from job losses at thousands of suppliers.

Note, I know of no MBA who argues businesses should support government policy of preventing customers buying on credit they will never repay. After all, how can an MBA justify high pay based on their marginal product being negative sales year over year. Such policy would require businesses pay workers more money to increase sales, ie, MBAs would need to argue that the employer pay higher wages to increase sales revenue.

If they aren’t now, they’re about to be.

Commissar Warren has a plan to impose prison sentences for CEOs of companies which enter civil litigation settlements, “regardless of intent or knowledge” of the crime or civil statue violation.

I call it the Dramatically Increase CEO Pay Bill.

Japan just re-arrested Ghosn for the 4th time. Is he underpaid by Nissan and Renault who both accuse him of stealing from them to fund his lavish lifestyle?

Yes and I'd like to see them even more underpaid. (same with LeBron BTW he is way underpaid.)

'Are top CEOs underpaid?'

Is this a trick question?

Apparently not - 'CEOs are paid less than the value they bring to their companies.' Well, that was not the case with Kenneth Lay or Bernard Ebbers, but they were criminals, so maybe they were not fit to be CEOs in the first place. Certainly not the sort of anti-heroes that one writes love letters to, one would hope.

But how about this guy? 'The fall of General Electric has been nothing short of spectacular. The world’s most valuable company in 2000, it has been in a state of accelerating decline ever since. It has sold off key units. Just last month it announced plans to spin off its health care division and unload its 62.5 percent stake in an oil field services company. It has also shed value through its declining stock price — more than $150 billion since January 2017. And last month it suffered the indignity of being tossed out of the famed Dow Jones Industrial Average.

Naturally, much of the blame has fallen on Jeff Immelt, CEO of the company from 2001 until last year, and on the GE board of directors that kept him on for so long.

Immelt has an impressive record for bone-headed and ill-timed acquisitions. He took his storied company into the subprime mortgage business in 2004, just as a credit bubble was getting ready to pop. In 2015 he bought the power generation division of French multinational named Alstom. In so doing he expanded GE’s position in coal-fired turbines just as utilities were moving to natural gas and renewables.' Oops - wrong CEO.

This one - 'The fall of GE is at least in part a story of excess adulation of its erstwhile super CEO, Jack Welch. One of the reasons GE’s valuation has dropped so much is that it was vastly inflated in the 1990s as gullible Wall Street analysts bought into the myth of Welch.

The company reached a peak market capitalization of $601 billion in 2000 as Welch delivered quarter after quarter of increasing profits. In reality, these profits came by shortchanging capital investments, a move that would hurt the company later, and by tweaking the numbers in the financial unit known as GE Capital. When the financial crisis hit, GE Capital was so undercapitalized that the company needed what was billed as an investment, but was more of a bailout, from Warren Buffett.'

oh well if you've got an anecdotal counterexample then that changes everything

Four actually. Here is another - 'Richard Fuld had a $66 million payday in 2000 because, well, he was a great chief executive officer, now wasn’t he?

Though the Internet bubble popped and the Nasdaq peaked in 2001, he made another $105.2 million. In 2002, he bagged yet another $28.7 million; 2003, $52.9 million; 2004, $41.8 million; 2005, $104.4 million; 2006, $27.3 million; 2007, $40 million.

His tab for eight years of CEO work came to $466.3 million.

You may still remember the name of his company. It was called Lehman Brothers. '

So, from the same article - 'Her study analyzed 500 corporate executive positions that have been listed in The Wall Street Journal’s annual executive pay surveys over the past 20 years.

When she began this research, she expected bailed-out, booted and busted CEOs would make up maybe 15% of the sample. But no, it tallied 38%.'

Here is a breakdown - 'CEOs whose firms received taxpayer bailouts or ceased to exist held 22% of these 500 slots over the past two decades.

• CEOs who were forced out of their jobs made up 8%. (This is not bad work, if you can get it: The average golden parachute was valued at $48 million.)

• CEOs who led companies paying significant fraud-related fines or settlements comprised another 8% of the sample. (Most of these settlements totaled more than $100 million.)'

And as noted, that study did not even count someone like Angelo Mozilo.

stati - "oh well if you've got an anecdotal counterexample then that changes everything"

cp: "Four actually. "

I'm pretty sure that clockwork_prior doesn't grok statistics.

And I am positive you did not read this - ''Her study analyzed 500 corporate executive positions that have been listed in The Wall Street Journal’s annual executive pay surveys over the past 20 years.

When she began this research, she expected bailed-out, booted and busted CEOs would make up maybe 15% of the sample. But no, it tallied 38%.'

Of course, those are someone else's statistics - you are welcome to examine them at your leisure. The link is provided, and even made it past the filters, though of course is not wikipedia.

And the total I mentioned was five - Mozilo did not meet the criteria for that 38%, with its breakdown into three categories.

Yes, you still don't understand statistics.

Someone makes statistical point about A. You counter with anecdotal evidence. And then later when challenged you counter with statistical point about B.

A is Not B.

So stasi write 'oh well if you've got an anecdotal counterexample then that changes everything' as A.

The response to A is to provide a link to non-anecdotal data showing just how many CEOs destroy company value, not create it.

I realize that actually quoting what I am responding to seems to confuse some commenters here.

38% of CEO demonstrably do not bring any value to their company at all, which would seem to show that those 38% are definitely not underpaid, they are distinctly overpaid.

I'll try to keep this simple.

The topic of the thread is about a statistical analysis of:
CEO pay / CEO value added

Your response was an anecdote about the performance of a former CEO of GE. When challenged on anecdotal grounds, you responded with a story about statistics on bad CEO behavior.

The thread isn't about bad CEO behavior. It's about the value of CEO's. As is often the case, you went off on a tangent and threw out a wall of pointless text.

"38% of CEO demonstrably do not bring any value to their company at all,"

And that's just balderdash. The study you cited is a non-peer reviewed claim by a partisan organization.

what is the market mechanism for achieving market prices for CEO labor ?

If that mechanism is malfunctioning or inherently faulty -- why so ?

Here's some bad news for Boeing's CEO: Someone, presumably the CEO, approved a new aircraft (the 737 Max) with a design defect, a defect that caused the aircraft's nose to pitch upward, risking a stall. To offset the design defect, Boeing installed a sensor that, if the pitch upward became too great, the pilots would be disarmed and the aircraft would become self-driving. Why would a CEO approve a design that is so obviously defective that it required an offsetting self-driving trigger? Will the CEO bear the negative surplus from the bad news? That may be the least of his concerns, a charge of negligent manslaughter a very real concern.

[The design defect: the 737 Max is essentially the same aircraft as the prior model, except it has more fuel-efficient engines. The problem is that the engines are larger, and could not be attached at the same place on the wings (they'd risk hitting the ground), so Boeing could either build a new aircraft to accommodate the larger engines or use the same aircraft but move the engines closer to the fuselage and raise the landing gear. Boeing chose the latter path. But this design caused the nose to pitch upward, as indicated, risking a stall, requiring some offsetting mechanism. The offsetting mechanism: a sensor that would disarm the pilots and make the aircraft self-driving.]

This isn't new, rayward. Romaine Lettuce, Toyota recalls--just think about publishing. What's the effect of having people who publish their writing, meaning their writing has to be exact? Well, for one thing its never perfect. Another is probably at the macro level you're hiring people who are exact instead of excellent. So more well read authors tend to be arcane though maybe a very well read author can manage both through sheer uncanniness. And less read authors like the Doris Burke's of the world live a pure celebrity life, unsinged by aggression or needless sympathy.

The CEO of Boeing is qualified to make this decision about whether to band-aid the existing 737 airframe with the MCAS system or develop a new airframe to replace the 737?

It seems like a CEO should -- or any worker -- should be underpaid relative to the value they create, no? If an employee generates $100 of value, and the employee captures 100% of that, the company has gained nothing from that employee. So why hire the employee in the first place, if all of the extra value created by the employee, is captured by the employee?

If you hire 100 cashiers, you get lots of value from them, yet their marginal contribution can be close to 0. I.e. if you fire one, it won't affect your profit. If you fire 10, it will. So in a (very) simple model you would expect employees to capture close to 100% of their marginal value.

I'm not sure how does this work with the CEO though, as there is only 1, so the 'average value' equals 'marginal value'. And it's not clear to me what 'underpaid' means in such context.

"CEOs capture only about 68–73 percent of the value they bring to their firms" -— as a shareholder, wouldn't I be better off with a CEO who maybe brings a bit less value, but captures much less himself?

Great point and Carl Icahn seems to be able to replace higher paid CEO's with lower paid CEO and increase profits.

Exactly. The real question is what fraction of the value that CEO's produced and then captured back, say in 1979.

Envy, the yearning for what someone else has, is a pathetic and destructive human emotion the Hebrew Bible warned about several thousand years ago. The left likes to play on this emotion under the guise of fairness. Highly unlikely that anyone would be better off if corporate big wigs were paid less -- regardless of the econ gibberish in never ending econ papers attacking or supporting a handful of people who are or aren't receiving more than their fair share.

Distrust of ostentatious slash overly luxurious wealth and displays of wealth cuts across the political spectrum, as does the condemnation of greed (bling, filthy lucre, etc).

"Boeing installed a sensor that, if the pitch upward became too great, the pilots would be disarmed and the aircraft would become self-driving."

"Self-driving" is a rather extreme way to describe what the MCAS system, and the idea of a system that pushes the nose down in system-perceived hazardous conditions is scarcely new. "Stick pusher" systems have been in use for decades on certain aircraft types.

The decision to build the 737 Max rather than a new, clean-sheet design was probably made at the CEO level, but I doubt that the specifics of MCAS operation...the triggering based on single AOS sensor data, the repeated action...were determined anywhere near this level.

The difference with the 737 Max is that the design of the aircraft causes the nose to pitch up and risk a stall, whereas the stick pusher is a safety device that is activated if the angle of attack reaches a predetermined level as the result of the actions of the pilot or the flying conditions not the design of the aircraft (if a jetliner stalls, it is very difficult to recover, so avoiding a stall by application of the stick pusher is an extra safety device). Is that splitting hairs? I don't think so. I might add that Boeing chose its path for two reasons: it was cheaper than to build a new aircraft that would accommodate the larger engines and it was faster - Boeing was in a race with Airbus to be first with the new, more fuel-efficient aircraft. Here's the clincher: Boeing marketed the 737 Max as essentially the same aircraft as the prior version of the 737 and would require no special pilot training.

The Wassermann test or Wassermann reaction (WR)[1] is an antibody test for syphilis.

So the problem with MCAS was created at a lower level and the CEO was not to blame. OK.

Now suppose the solution had been brilliant, and worked like a charm, and Boeing's sales and value had increased as a result.

We would hear no end of what a great job the CEO had done increasing value, etc.

"So the problem with MCAS was created at a lower level and the CEO was not to blame. OK."

Nope...didn't say that. The CEO is ultimately responsible for *everything that happens* in the company, good and bad. But when you're talking about a criminal charge of negligent manslaughter, do you really want to send the CEO to prison for an unwise decision that was made several levels down? Criminal responsibility is something different from civil liability, which is in turn different from 'he did a bad job, so fire him or cut his bonus.'

Since corporations are persons, why not prosecute Boeing? I'm not sure how a corporation could be punished - how would a corporation serve time in prison? Should corporate executives of a corporation convicted of a crime serve the time?

I'm not talking about criminal charges. I'm talking about the CEO's compensation in relation to value added.

You seemed to be saying that the CEO shouldn't suffer because of the poor design of the MCAS. But the CEO would certainly benefit if the new 737 design had been a roaring success owing to the great work of some engineers and software developers.

I keep asking how we measure the MP of the CEO, because I think a lot of the value of a company is created by the work of its employees, and CEO's get too much credit.

And if you measure the value as increases in the stock value much is created in the broader economy and on the stock exchange, which the CEO has little to do with.

Of course employees are paid less than the value they create. For the same reason retail customers pay more for the goods they buy than the retailer paid for them: no markup, no profit, no business.

Shall we now cue The Surplus Value Theory of Labor? "CEOs of the world unite, you have nothing to lose but your stock options!"

'For the same reason retail customers pay more for the goods they buy than the retailer paid for them: no markup, no profit, no business.'

Co-ops - they are a thing. And really, really hated by retailers.

Credit unions - they are a thing. And really, really hated by retail banks.

Careful when bandying the word 'profit' around in connection with 'business.'

I think banks hate credit unions because the latter are exempt from paying federal corporate taxes. Banks feel that this is unfair because many credit unions do not behave in ways materially different from traditional retail banks. Whether the retail bankers are correct in their assessment, I honestly do not know.

Nonprofits are sometimes known as "non-business entities."

But, whatever you call them, they must somehow generate a surplus to at least cover their costs. For example, a credit union must still markup the cost of money (i.e., charge borrowers more than it pays depositors) if it wants to keep the lights on.

And, many consumer co-ops do create something that looks remarkably like a profit which, if not retained to grow the non-business, is distributed to the member-owners.

There are differences between for-profit and non-profit entities, but, in a consumer co-op, employees can't capture all the surplus or they'd defeat the reason for having a consumer co-op in the first place.

Perhaps you were thinking of producer co-ops, such as employee-owned businesses? In which case employees may well capture all the surplus value, as they are both employees and owners.

Neither co-ops nor credit unions are 'non-profit' by the definition of a charity. That the profits of a co-op or credit union are retained by the members does not make them non-profit entities either.

'producer co-ops'

Actually, I was thinking of something like this -

Here is a bit of its history - 'Southern States Cooperative was founded in 1923 as the Virginia Seed Service by 150 farmers in Richmond, Virginia to help develop seeds, it expanded to distribution of feed in 1925, fertilizer in 1926 and farm supplies and petroleum shortly after.

At the time, farmers in Virginia were unable to buy seed guaranteed to grow in the Commonwealth. Despite scientific findings about the correlation between the quality of seeds and the quality of crops they produced, commercial seed handlers continued to sell poor-quality seed. In 1923, about 150 farmers met in Richmond, Virginia, to take steps to remedy the situation. These 150 farmers, calling their cooperative Virginia Seed Service (VSS), found that pooling their resources enabled them to procure seeds better suited to Virginia's growing conditions.

VSS began distributing feed in 1925, added a fertilizer service in 1926 and started handling farm supplies and petroleum products a few years later. In the early 1930s, VSS was looking beyond Virginia and changed its name to Southern States Cooperative. Soon other states were served including Delaware and Maryland in 1934, West Virginia in 1941, Kentucky in 1945 and North Carolina in 1986. '

Not sure how you would categorize it, particularly in light of this - 'In 1948, the cooperative established its first hybrid corn research program. Six years later, realizing it could no longer rely solely on college research, Southern States helped establish a chain of feed testing and research farms located across the country. And in 1960, Southern States and ten other regional co-ops formed a national seed-breeding research organization, FFR.'

By Euler’s Theorem, unless the production function has constant returns to scale, it is mathematically impossible that every factor is paid its marginal product. And it seems exceedingly unlikely that major industries would be characterized by constant returns to scale technologies.

How exactly do you measure the MP of a CEO?

Tyler is just being usual contrarian self here, and somewhat defending his tribe.

I had forgotten that, in America, greed is good.

Free Carlos Ghosn! He is surely being held hostage for no particular wrong, and was underpaid (seriously, for the value he added).

On top of that, he's of Brazilian, French and Lebanese descent, a formidable combination.

"CEOs capture only about 68–73 percent of the value they bring to their firms. "

This seems like it's a supply and demand issue. Companies are going to buy the cheapest CEO that meets their needs. If the CEO willing to work for 68% is just as good as the guy who wants 85% then you hire the cheap one.

Apparently CEO's are in greater supply (relative to demand) than workers.

If you think that's bad, 68%, a study I read said that pioneer inventors (think Edwin Howard Armstrong and FM radio), only capture well less than 5% of the value of any invention they create. This is why only nerds with no need or want for money end up as inventors. Nobody sane with a living to make, unless desperate, will attempt such a foolhardy enterprise.

I guess Jerome Powell should be paid $1 trillion per year.

Only if you believe--against the evidence--that money is short term strongly non-neutral.

I defer to the (much more convincing) Leonard Mlodinow argument that the apparent performance of a CEO is largely down to chance; and that trying to link it to marginal product is borderline silly.

I'd strike out "borderline," but otherwise I wholly agree.

Tyler is far too easily seduced by simple models.

"CEOs capture only about 68–73 percent of the value they bring to their firms. " I guess this means that markets are completely useless if even the market for CEOs who negotiate their salaries with boards directly can't get the price right. Let's just move on to socialism then. We'll start by having the government subsidize CEO pay. What total nonsense.

It's because the CEO market is a market for lemons.

Should be prefaced: "According to the cult of marginal thinking . . . . . ". Of course, those who are disgusted at the pay of CEO's aren't coming from the standpoint of the religion of marginalia. Robert Paul Wolff has an excellent takedown of the mathematical presuppositions of the cult of marginalia. But even here there are clues to its spuriousness: ". . .given that the talents of the CEO would be worth much less in non-CEO endeavors". CEO's are engaged in capitalistic make-work and only blind faith in a cult would convince someone otherwise.

Nope, they get the salary they negotiate.

So how about this. Few positions pay as high as CEO positions, so if you can get a CEO job you take it and become one of the most highly paid people anywhere. However, unlike most other jobs, leaving a CEO position for another equally paying position is nearly impossible, so the company has more reason to believe you’ll stay longer. Therefore, the CEO gets the highest paying (and most prestigious, if that matters to him/her) job, but the company gets to extract a little bit of extra value as compared to other positions because of the scarcity of competition at that level. Nobody is underpaid.

Note - by “stay longer” I don’t mean in actual time so much as generally have less propensity to leave for a better position. In short the quantity supplied of CEO jobs is lower so the “price” of such jobs as measured in percentage of productivity gains is higher.

This paper was written by economists right- how do they not see this?

Um, the CEO's job is to create shareholder value. Of course they won't be paid 100% of their marginal value.

I'd be more sympathetic if I didn't know that CEOs justifying their high salaries wouldn't rely upon The Ostrich Defense, The Elmer Fudd Defense, etc. within seconds of being accused of crimes or mismanagement.


1. Boards measure the gains less so than the costs of failure, or continued failure. They are buying risk mitigation more often than gains.
2. The board exacerbates the problem because finding someone everyone accepts increases the cost for each person needing buy in.
3. Too great a relationship between financial investors and CEO's - they drive up the price and are often involved in promoting their own 'relationships' to do so.
4. Search firms drive up the price and benefit from driving up the price.
5. If you take the CEO job and fail your career is largely over.
6. Your chances of failure as CEO of a challenged company are fairly high.
7. It is nearly impossible to stay on top, so CEO's play a 'peak' game, so that they can retire.
8. In other words, there is a lot more 'LOTTERY' going in here than HIRING.

If CEO's got paid 100% of their value, then shareholders receive on net zero dollars, so what do they need them for?

Also who pays for the risk of appointing the wrong CEO, who drives the company into losses or even bankrupcy?

As was mentioned above, how does the AIG bailout bonus factors in this love novel? Not trying to destroy value creation here with your book, just being a contrarian.

How much do the CEO's direct reports get back?

My vague impression is that CEO pay has gone up considerably relative to the upper levels under the CEO. Is that true?

Is this marginal/incremental value relative to other firm employees or relative to the counterfactual with some replacement CEO? Is the supply of viable CEOs so limited that the individual CEO's marginal product in a major firm can't be matched by another? And then without market distortions wouldn't the labor market drive the costs of CEOs down to the CEO candidate's own opportunity cost, next best option?

It's just very difficult to believe that the contributions of any one CEO are that much more valuable than another CEO, or that the population of (potential) CEOs is that different from the population of other business managers (driving some fundamental scarcity of CEOs). It seems more likely that the CEO role within a firm is very important and valuable relative to other firm roles, but not necessarily that the market is working efficiently when CEOs are compensated so much more than anyone else in the firm (controlling for risk, effort, etc.) Assuming no barriers to entry for the CEO market, and relative smooth distribution of successful CEO attributes in the population, that cartel-like effects have to be driving the disproportionate compensation (inter- and intra-firm).

I don’t see these CEOs sharing from any of the risk, while should they have a big share from the profits then?
Also how much value they bring into the company? Most CEOs could be replaced by an other one, and not much would change.

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