CEO talent: A dime a dozen, or worth its weight in gold?

• Author: Nicholas E. Donatiello,David F. Larcker,Brian Tayan
• Date: 01 June 2018
• DOI: http://doi.org/10.1111/eufm.12158
• Published date: 01 June 2018

DOI: 10.1111/eufm.12158

ORIGINAL ARTICLE

CEO talent: A dime a dozen, or worth its weight

in gold?

Nicholas E. Donatiello

|

David F. Larcker

|

Brian Tayan

Stanford Graduate School of Business,

Stanford University, Stanford, California,

USA

Emails: nd@odysseylp.com;

dlarcker@stanford.edu;

btayan@stanford.edu

Abstract

Very little sophisticated research exists on the size, quality,

and efficiency of the labor market for CEO talent. This

paper sheds light on this labor market by considering the

perspectives of directors directly responsible for hiring and

firing the CEOs of the largest publicly traded corporations

in the United States. We find that directors overwhelmingly

believe that the CEO job is exceptionally challenging

and only a handful of executives are qualified to run their

company and others in their industry. This suggests that the

labor market for outstanding CEO talent is significantly

tighter and more competitivethan governance experts might

realize.

KEYWORDS

board of directors, CEO labor market, CEO recruitment, CEO

succession planning, corporate governance, internal talent

development

JEL CLASSIFICATION

G34

1

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INTRODUCTION

In recent years, there has been considerable criticism of the amount of money that CEOs earn to run the

largest US companies. One prominent observer calls CEO pay ‘out of control’(Lowenstein, 2017).

Another claims that the rise of CEO pay is ‘unstoppable’(Morgenson, 2013). According to a third,

executive compensation is a ‘first-order’problem that ‘the self-correcting mechanisms of the market

cannot be relied on’to fix (‘Neither Rigged nor Fair,’2016). Implicit in these criticisms is the idea that

Eur Financ Manag. 2018;24:301–308. wileyonlinelibrary.com/journal/eufm © 2017 John Wiley & Sons, Ltd.

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