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strategy and business
 / Spring 2006 / Issue 42(originally published by Booz & Company)


Recent Research

The research found that when CEOs sit on committees (especially at companies that have more committees than average), their influence on the organization is greater and their salaries are around $350,000 higher than those of CEOs who don’t typically do committee work.

Among the other interesting findings, two stand out. First, CEO compensation is more closely linked to the size of a firm than to its performance. In fact, company size accounts for 22 percent of the variance in compensation, with performance accounting for a mere 2 percent, according to the authors.

Second, and potentially more controversial, is the finding that CEOs receive more compensation when the board has more women on it. The authors offer three possible explanations: Women are more generous; women directors are more easily manipulated by CEOs; or boards with highly paid CEOs appoint more women. Only the second is dismissed. In the end, the authors argue, board selection must deliberately take into account the combined psychological dynamics of the directors. Only then will CEO incentives be more closely aligned with performance.

Author Profile:

Des Dearlove ([email protected]) is a business writer based in the U.K. Mr. Dearlove is the author of a number of management books and a regular contributor to strategy+business and The (London) Times.
Stuart Crainer ([email protected]) is a business writer based in the U.K. and a regular contributor to strategy+business. He and Des Dearlove founded Suntop Media, a publishing and training company providing business content for online and print publications.
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