In the business world, we're continually taught that high CEO pay is a necessary evil in order to attract top talent, and therefore, top returns. Or "pay for performance" as they would have you believe.
A recent analysis of CEO compensation data publicly released by Equilar oddly shows little correlation between the two.
This graph shows the pay of 200 CEOs and the stock returns of their companies: (click to enlarge)
The trend line—the average of how much a CEO’s ranking is affected by stock performance—shows that a CEO’s income ranking is only 1 percent based on the company’s stock return. That means that 99 percent of the ranking has nothing to do with performance at all. (The size and profitability of companies didn’t affect the random patterns.)
If “pay for performance” was really a factor in compensating this group of CEOs, we’d see compensation and stock performance moving in tandem. The points on the chart would be arranged in a straight, diagonal line.
In short, nope. Furth