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CEOs of companies whose board members are

posted by Jason Kottke   Jan 22, 2007

CEOs of companies whose board members are socially well-connected get paid significantly more than those who work at companies with less connected board members. “Academics have found little evidence that higher executive pay leads to better company performance, and the recent study of three thousand companies actually found that the firms whose directors were the most well connected — and which paid their C.E.O.s most lavishly — in fact underperformed the market. Markets work best when people make independent decisions about how much a commodity — in this case, the C.E.O. — is worth. They stop working well when people simply imitate what others are doing, or when non-market factors (like how well you get along with the boss) intrude.”

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