You're right, partially. The thing about free markets is that the average value across all data points will converge to the free market value, and there are out

You're right, partially. The thing about free markets is that the average value across all data points will converge to the free market value, and there are outliers on both sides. There are lots of CEOs that are under-paid for their abilities as well as lots of CEOs that are over-paid for their abilities. If you were to look at all CEO salaries averaged over all companies in an industry, you probably would get a pretty fair view of what the average CEO is worth, but of course an N=1 can deviate greatly from the average. A company's performance may be strongly correlated to a CEO's ability and performance, or not. These salaries aren't set algorithmically and there's no way to predict ahead of time exactly what the impact of a given person on an organization will be. Past performance is not a guarantee of future returns, but there's really nothing else to determine CEO salary by except for experience, fit, and past performance. The salaries are set by whatever the board and shareholders are willing to pay, which is influenced by all the data (objective and subjective alike) -- a central tenet of free markets. The truth is there's really no other way to do it.