I was shocked (but encouraged) to read the New York Times yesterday. Instead of writing another article about how CEOs are massively overpaid, dishonest, or both, Andrew Sorkin and Eric Dash make a strong argument that U.S. CEOs are underpaid! According to the article, private equity firms are increasingly successful in luring talented public company executives to run private equity-funded firms. A big part of the reason is that private equity firms pay those executives more.
Consider what this exodus of talented public company executives to private equity-funded companies means. These executives can certainly get hired as CEOs of public companies. If they were so overpaid, they would not leave the public companies. The fact is that many of them are leaving to run private equity-funded companies.
This also suggests that CEOs do not control their boards and get the boards to overpay them. On the contrary, the fact that CEOs are leaving suggests that public company boards may not be paying their good CEOs enough. I am encouraged because it may finally have become apparent, even to the New York Times, that U.S. CEOs, boards, and corporate governance are subject to market forces. In addition to the fact that public-company CEOs can earn more as private-equity company CEOs, here are a few additional observations that suggest that the criticism of CEOs and boards may have gone too far.
See full Article.
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