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> $100 million CEO is worth $50 million more than a $50 million CEO, so your economic outcome is the same regardless of which one you hire What you're suggesti

> $100 million CEO is worth $50 million more than a $50 million CEO, so your economic outcome is the same regardless of which one you hire What you're suggesting here is not that there's no correlation, but that there is a latent correlation hidden by the market. Another scenario is that some CEOs do well for their companies and some do poorly and this doesn't depend on how well they're paid. In other words, I'd vote for possibility 2, except instead of saying CEO pay and company performance are totally random, I'd say they're independent of each other.

byrneseyeview 15y ago
Pay is not the independent variable here. I'm not arguing that if you double someone's pay, you'll double their performance. I'm saying that if there's zero correlation between pay and performance, and that pay to some extent predicts pre-pay performance, then one is forced to argue that well-paid CEOs are superior to poorly-paid CEOs, on average, but that they capture the benefit they create. And that's not hard to believe. If someone had just a 10% chance of running Exxon 1% more profitably, their market value would be $40 million per year.