No, according to this report in the New York Times on a recent study by two US academics who:
“…conclude, contrary to the prevailing line, that chief executives can’t readily transfer their skills from one company to another. In other words, the argument that C.E.O.’s will leave if they aren’t compensated well, perhaps even lavishly, is bogus. Using the peer-group benchmark only pushes pay up and up.
“It’s a false paradox,” Mr. Elson said in an interview last week. “The peer group is based on the theory of transferability of talent. But we found that C.E.O. skills are very firm-specific. C.E.O.’s don’t move very often, but when they do, they’re flops.”
Executive pay has come under scrutiny — and criticism — in recent years, in part because so many ordinary Americans are struggling in a difficult economy. Companies have pushed back, often pointing to the peer-group benchmark. But that benchmark has had a pronounced effect on pay levels across corporate America. As the Delaware study notes, one company’s showering of rewards on its executives affects executive pay at every one of its peers.
“…There is no conclusive empirical evidence that outside succession leads to more favorable corporate performance, or even that good performance at one company can accurately predict success at another,” the authors conclude. “In short, executive skills cannot pass the most basic test of generality: transferability.”
See also: Executive pay: Government proposes that annual binding vote will need “supermajority” to pass
High Pay Commission recommendations: Twelve measures to curb “excessive top pay”
Follow us on Twitter @CoFinLaw
Company and Financial Law 