What Is CEO Talent Worth?

by David Larcker, Brian Tayan, Usman Liaqat
Citation
Title:
What Is CEO Talent Worth?
Author:
David Larcker, Brian Tayan, Usman Liaqat
Year: 
2012
Publication: 
Stanford Closer Look Series
Volume: 
CGRP23
Issue: 
January 24, 2011
Start Page: 
1
End Page: 
7
Publisher: 
Stanford University
Language: 
English
URL: 
http://www.gsb.stanford.edu/sites/default/files/documents/CGRP23-LeaderPay_0.pdf
Select license: 
No License (All right reserved)
DOI: 
PMID: 
ISSN: 
Abstract:

 

  • What Is CEO Talent Worth?  (PDF)
    By Professor, David F. Larcker and Brian Tayan, Researcher, Corporate Governance Research Program, Stanford Graduate School of Business, and Usman Liaqat
    January 24, 2012

The topic of executive compensation elicits strong emotions among corporate stakeholders and practitioners. On the one hand are those who believe that chief executive officers in the United States are overpaid. On the other hand are those who believe that CEOs are simply paid the going fair-market rate.

Much less effort, however, is put into determining whether total compensation is commensurate with the value of services rendered.

We examine the issue and explain how such a calculation might be performed. We ask:

* How much value creation should be attributable to the efforts of the CEO?
* What percentage of this value should be fairly offered as compensation?
* Can the board actually perform this calculation? If not, how does it make rational decisions about pay levels?

Read the attached Closer Look and let us know what you think!

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Tags: CEO compensation, corporate governance educational and teaching material, corporate governance research, Executive compensation

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