Though company boards attempt to attract high-performing CEOs with high salaries and hope to determine compensation based on results, the performance of many high-level CEOs does not correlate with their salary, according to The Wall Street Journal.
Only two of the highest paid CEOs in 2017 who did not leave their posts before the end of the year led their companies to finish the year among the top 20 companies for shareholder returns.
"Stars are often underpaid, while average performers are often overpaid," Herman Aguinis, PhD, a professor at George Washington University School of Business in Washington, D.C., told the WSJ.
Boards often determine CEO pay based on the compensation of competitors, even though their performance may vary greatly. In a study of over 4,000 CEO salaries, Dr. Aguinis found nearly no overlap between the top 1 percent of CEO compensation and the top 1 percent of CEO performance.