Are celebrity CEOs really worth big bucks?
Filed in archive executive pay by leon on March 12, 2007

Probably not, according to a study from four academics from Rutgers University, New York University, Pennsylvania State University
and the University of Georgia.The study The Burden of Celebrity: The impact of CEO certification contests on CEO pay and performance examined whether whether companies led by CEOs who were the recipients of the Financial World CEO of the Year award between 1992 and 1997 did any better than those led by non-celebrity CEOs. The researchers examined the performance of 278 companies of the Standard&Poor's (S&P) 500 from 1992 until the end of 1996.
They found that there was a positive stock market reaction, as you would expect, immediately after the prize was announced. But it wasn't that great either. There was a slight rise, of about 0.25 percent in market return for these companies. Furthermore, the aura faded quickly. According to the study, the actual return versus expected market return was in negative territory (-1.13 per cent) after just 30 days. This negative return got even worse over time, slipping to a highly significant -8.23 percent by day 240.
According to the authors, the problem is the "burden of celebrity". Simply put, the market and boards expect more. Perhaps too much.
Still, the researchers found that celebrity status paid off big time for CEOs.
"Winning a medal increases a CEO's pay in that year by approximately 10 percent, and each medal awarded in the previous five years adds almost 5 percent to his/her total pay,'' they write.
Permalink: Are celebrity CEOs really worth big bucks?
Tags:
celebrity CEOs compensation ceos business corporate celebrity+ceos ceos+really really+worth
Trackback: http://www.creative-weblogging.com/cgi-bin/mt-tb.pl/57425












