Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Too few CEOs are worth the millions or billions in payment they receive. Unfortunately, too many investors often assume otherwise.
Superstar or supernova?
There are excellent CEOs in corporate America who perfectly deserve "superstar" status. They're smart, successful, innovative, visionary, and even wise, on occasion. Sometimes they even wear black turtlenecks.
Berkshire Hathaway's (NYSE: BRK-B ) Warren Buffett, Apple's (Nasdaq: AAPL ) Steve Jobs, Amazon.com's (Nasdaq: AMZN ) Jeff Bezos, and Netflix's (Nasdaq: NFLX ) Reed Hastings all spring to mind as examples of superstar CEOs. We investors love to read about these folks; we'll turn up the TV volume when they're being interviewed, and hang on their every word.
Still, there are plenty of CEOs who seem more "supernova" than "superstar." Neither Carly Fiorina nor Bob Nardelli are known for great tenures at Hewlett-Packard (NYSE: HPQ ) or Home Depot (NYSE: HD ) , but both did pretty darn well financially in those posts, particularly after receiving huge golden parachutes upon departure. Abercrombie & Fitch's (NYSE: ANF ) Mike Jeffries got called out as one of the highest-paid CEOs in the U.S. last year, raising legitimate questions about whether his compensation appropriately reflected his company's lagging performance.
Mean doesn't mean good business
Last year, the average CEO made 263 times the wage of the average U.S. worker. Regardless of outliers, plenty of CEOs' performance is actually pretty average, even if the pay and respect their title commands is not.
Maybe it's time to take that default respect down a notch. Let's not assume that just because somebody's sporting a CEO title, they naturally perform excellently, especially when reality doesn't back up that assumption.
A CEO is as good as the people who surround him or her. Sometimes, a worker on the customer service line or a person working in the mail room could have a better idea of the biggest threats or opportunities facing a company.
Studies back up these arguments. Although extraversion and even extreme ego are very often associated with a "good," superstar-style CEO, Harvard Business School recently collected data suggesting introverts can make equally good corporate chieftains. According to the study, such leaders are "more likely to listen to, process, and implement the ideas of an eager team."
As far as the compensation issue goes, the Harvard Business Review recently reported on a study arguing that high levels of compensation can create ruthless, non-empathetic leaders. Research on "power holding theory" shows that people in positions of power over others often rationalize unpleasant or unethical behavior. An empathy-free leader who fosters a ruthlessly mean workplace probably will not succeed.
What a load!
If you're like me, you probably have no problem with high-performing CEOs taking home handsome salaries. Enjoy your chateau, dude -- you earned it. However, the assumption that anyone granted a CEO title should always make big bucks, whatever his or her performance, often ends poorly for shareholders.
Frankly, I consider CEO worship, and the excessive compensation it often breeds, a steaming load of garbage. Investors should question whether the folks leading their companies are underworked and overpaid . What do you think? Sound off in the comments box about whether we need to knock CEOs off their collective pedestal.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.