Section FourCASE 4-2 continued
explanations and attributed CEO high compensation to other
sources of power.^4 Some of Crystal’s conclusions are as follows:
So is there any rhyme or reason to explain the huge
variation of CEO pay levels? Short answer: Forget it...
There’s no justifiable theory on a shortage of CEO talent
to drive up CEO pay. But there is a creditable theory at
work, the theory of CEO power. Pack the board with your
friends, hire consultants who are good at blowing smoke,
float a lot of statistics about how other companies offer
their CEOs a ton of money, and, voila, you, too, can
make a lucrative sum no matter how you perform, and
see your pay rise at a rate faster than people who fill
other important jobs in the organization.^5On the other hand, there are defenders of current levels
of CEO compensation. Consultants Ira Kay and Rodney
Robinson have argued that the pay of CEOs is justified by the
performance of their companies. Further, they have pointed out
that academic research studies using time series methodologies
provide the basis for such conclusions.^6 Even Crystal has found
a small positive relationship between performance, in the form
of shareholder returns, and CEO compensation. He has