Thursday, January 11, 2007


Batter Up - The "Star Athlete" Fallacy Of The Overpaid CEO

Salon takes a poke at the fallacy, promoted by "Neutron Jack" Welch and others, that good CEOs are as scarce as athletes, rock stars and Oscar winners, and should therefore be compensated for their scarcity. As Salon notes, bad CEOs often overstay their welcome far longer than bad ballplayers - much less movie stars who take a career misstep and end up in instant oblivion. "Unlike baseball players, who get tossed out on their rears when they louse up, the Nardellis of this world stay on and on, through one disaster after another. It is front-page news when CEOs drive the train wreck required to get fired, and even then they often pull themselves out of the wreckage and climb behind another throttle... Nardelli was signed for a Michael Jordan-size contract, but he did a poor job and still walked away with a fortune."

"The Scarce Athlete theory is predicated on another fallacy," Salon goes on to say, "which is that CEOs rise to their positions in a kind of Darwinian struggle, gnawing away at each other until the survivor emerges, a kind of King of Corporate Rat." In fact, the CEO very often hands over the reins to a relative or a crony, thereby awarding power to someone who never had to struggle for it, but was merely born in the right family or made the right friends.

"Greed on aisle 6" from Salon

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