High bonuses for CEOs in 2006 did not protect many financial institutions from poor performance this year, with Goldman Sachs as one notable exception. Are CEOs worth what they are paid?
New research from Professor Maria Guadalupe suggests that high CEO salaries do pay off. Guadalupe and her research partner Vicente CuÃ±at found that as global competition grows, so does the link between executive pay and performance.
Two other scholars — W. Gerard Sanders (Brigham Young) and Donald Hambrick (Penn State), formerly of CBS — did a different study and found that CEOs whose compensation packages include a large percentage of stock options tend to make risky decisions that generate share-price losses more often than gains.
According to Forbes, the average CEO salary for an American company is $15 million, with top salaries in the hundreds of millions.