<i>...showing someone can destroy or damage a company does not show they can run one excellently...</i><p>What it shows is that the marginal effect of a CEO is large - multiple percentage points of the company&#x27;s value. Therefore, the difference in value between a good and bad CEO is equally large.<p>Gizi: &quot;If the right guy manages the joint, it will do $11 billion. Are you willing to pay 10 million a year for this person?&quot;<p>Repeat the math with $10B and $7B, and you&#x27;ll still see that $20M or $50M is a very reasonable pay package to get the guy who is less likely to screw things up. Of course, if you truly believe CEOs have an insignificant effect, I encourage you to invest in companies with CEOs who are perceived as being terrible.<p><i>These results came from data that compared CEO remuneration to average employee remuneration.</i><p>Your linked study provides very weak support of these claims. It&#x27;s restricted to bank holding companies and thrifts during the financial crisis. In fact, there is a pretty obvious alternate explanation of it&#x27;s results - banks with a high pay ratio consist of a CEO + lots of tellers, mortgage officers, etc (e.g., Citi, Countrywide). In contrast, banks with a lower pay ratio consist of CEO + quants, traders, etc (e.g., Goldman, Morgan Stanley).<p>Can you think of another reason why banks with lots of mortgage officers might have performed worse during the crisis?