Think of it more in terms of expected value. For example, it is possible that a worse executive would have had a higher chance of causing an even worse outcome

Think of it more in terms of expected value. For example, it is possible that a worse executive would have had a higher chance of causing an even worse outcome than what happened. The point is that executive compensation is a drop in the bucket, compared to the value of a company as a whole. A CEO only has to have a slighter higher chance of getting a slightly better outcome, for the math to work out and the compensation to be worth it.