4 ms·

This is interesting, but there are so many things that can be at work that I'm not sure how much you can draw from this. For one, boards may elect CEOs that are

by c3534l 11y ago

This is interesting, but there are so many things that can be at work that I'm not sure how much you can draw from this. For one, boards may elect CEOs that are good for what they need at that moment - when a company needs to handle a large merger, they may choose someone with experience in doing that for that industry and their talents may never be fully utilized after that. And a CEOs performance isn't likely to be homogeneous over time either - they may get better or worse over time. I guess your basic problem is that CEOs aren't selected by a random process. So if a board of directors always did a good job choosing the right CEO, why would you expect there to be big, statistical differences anyway? I'm not also terribly clear on what sort of strength of effect the authors are looking for. A lot of people work for a company, are they trying to attribute all of a company's earnings to a single person? Or are they looking for a difference that is not very proportionate to what CEOs actually do. I should also point out that "could be due to chance" isn't in itself very interesting. That means that with the methods and data the authors happened to use, they didn't happen to find a statistically significant effect, and while that could be because they don't have an effect it could also be that the tools used to look for one were simply not up to par. That said, it's my understanding (and some experience) that the upper echelons of a lot of companies can be... a bit incestuous, cliquey, who-you-happen-to-know.

suneilp 11y ago
The "who-you-happen-to-know" part is very true. It's a small world up there in the "upper" tier. While I generally agree to the implications of chance, has much to do with that inner circle and who gets picked to do the job. No one is perfect, and the upper tier do not seem to have a solid understanding of this fact. People get picked because they can talk the talk or had some success at some point and that automatically decides they are good. Even failing can increase your prestige for reasons such as learned from failure or the blame gets shifted. However, I feel that it's all too often that the CEO failed to adapt and shifted blame.
bardworx 11y ago
> I should also point out that "could be due to chance" isn't in itself very interesting. That means that with the methods and data the authors happened to use, they didn't happen to find a statistically significant effect, and while that could be because they don't have an effect it could also be that the tools used to look for one were simply not up to par. My wife wrote had an analytical project when she was working on her masters in accounting. The thesis was correlation between CEO compensation vs Stock market performance. After two months of crunching data, she came to the realization that there was absolutely NO cofrelation. She was distraught by her data thinking she made a mistake so we re-crunched the numbers, attempted to find better samples data (larger range of top tier and lower tier companies), excluding financial companies from the data because of 2008 market and stock price, etc. At the end, we realized that CEOs compensation has very little effect on stock market price over X amount of time. If you you can rationalize that stock price = CEO performance, then this would be agreeable with the article itself.
- c3534l 11y ago
  Yeah, I'd have to look into it deeper. It seems like a hard thing to demonstrate rigorously.

by c3534l 11y ago

suneilp 11y ago

The "who-you-happen-to-know" part is very true. It's a small world up there in the "upper" tier. While I generally agree to the implications of chance, has much to do with that inner circle and who gets picked to do the job. No one is perfect, and the upper tier do not seem to have a solid understanding of this fact. People get picked because they can talk the talk or had some success at some point and that automatically decides they are good. Even failing can increase your prestige for reasons such as learned from failure or the blame gets shifted. However, I feel that it's all too often that the CEO failed to adapt and shifted blame.

bardworx 11y ago

> I should also point out that "could be due to chance" isn't in itself very interesting. That means that with the methods and data the authors happened to use, they didn't happen to find a statistically significant effect, and while that could be because they don't have an effect it could also be that the tools used to look for one were simply not up to par. My wife wrote had an analytical project when she was working on her masters in accounting. The thesis was correlation between CEO compensation vs Stock market performance. After two months of crunching data, she came to the realization that there was absolutely NO cofrelation. She was distraught by her data thinking she made a mistake so we re-crunched the numbers, attempted to find better samples data (larger range of top tier and lower tier companies), excluding financial companies from the data because of 2008 market and stock price, etc. At the end, we realized that CEOs compensation has very little effect on stock market price over X amount of time. If you you can rationalize that stock price = CEO performance, then this would be agreeable with the article itself.

c3534l 11y ago
Yeah, I'd have to look into it deeper. It seems like a hard thing to demonstrate rigorously.