Executive Pay

01.14.13

Some CEOs Are More Valuable Than Others

The Wall Street Journal today defends CEO pay as worth every penny.

[E]ven a slight edge in ability can translate into enormous payoffs. That's why Major League Baseball pitchers earn so much more than triple-A players, despite throwing fastballs only a couple of miles an hour faster. When the stakes are in the billions, shareholders should be more than happy to sign off on a multimillion-dollar paycheck, even if the recipient is just slightly better than the next best option.

By the same token, if CEOs' decisions have such a disproportionate impact on corporate profits, you might be willing to pay a lot to motivate them to put in extra hours in the office. And this view helps to explain—if not always to justify—many of the privileges that come with a corner office: the corporate jet that gives CEOs more face time with employees in different locales; the chauffeured limo that frees up time during the morning commute.

Which reminds me to dust off this favorite item from Business Insider, ranking the 10 worst financial CEOs. The winner was Vikram Pandit of Citibank, who managed to erase 4.4% of shareholder value for each and every one of the almost $8 million he was paid in 2011.