http://www.gsb.stanford.edu/news/research/compensation_daines_ceopay.shtml http://www.gsb.stanford.edu/news/research/compensation_daine... This study did a pee

http://www.gsb.stanford.edu/news/research/compensation_daines_ceopay.shtml http://www.gsb.stanford.edu/news/research/compensation_daine... This study did a peer comparison: [First, the researchers defined a way to measure CEO skill. Although many studies have examined the relationship between CEO pay and company performance, Daines and his colleagues wanted to isolate specific evidence of executive competence. After all, company performance can depend on a number of factors beyond the power of an individual CEO: the economy, regulatory constraints, or industry conditions, to name just a few. They decided that a firm run by a skilled CEO should consistently do better than its industry peers. More specifically, a skilled CEO should continue a firm's prior good performance and reverse poor performance. Conversely, a bad CEO would be more likely to continue a poor showing and to reverse the firm's prior successes. The results were instructive: The study, which reviewed CEO pay and economic performance between 1991-2002, found that in small firms, highly paid CEOs generally are more skilled than their industry counterparts. The correlation is even stronger if the firm has a large shareholder or if the CEO has been paid largely in stocks and options. Conversely, pay is more likely to be negatively related to skill in larger firms. "In many large firms, the highest paid executives actually performed the worst," said Daines.]