The support of having is stronger than you suggest. The study showed a significant negative association between firm performance and pay disparity in the Korean companies as well, from a separate study where more financial information is required to be disclosed.
I will also say that the CEO compensation is reasonable in most companies, it is just that after about the 8th decile performance starts decreasing and risk increases. The real problem seems to be the more extreme CEO to average employee pay ratios.
Can you think of another reason why banks with lots of mortgage officers might have performed worse during the crisis?
A larger pay gap in the executive ranks promotes greater risk-taking.
By the way, there was the highest CEO compensation compared to employee compensation just before the GFC hit.
...I encourage you to invest in companies with CEOs who are perceived as being terrible.
I would say that is terrible advice that has nothing to do with the conversation, as we were discussing pay ratios.
What it shows is that the marginal effect of a CEO is large - multiple percentage points of the company's value. Therefore, the difference in value between a good and bad CEO is equally large.
Gizi: "If the right guy manages the joint, it will do $11 billion. Are you willing to pay 10 million a year for this person?"
Repeat the math with $10B and $7B, and you'll still see that $20M or $50M is a very reasonable pay package to get the guy who is less likely to screw things up. Of course, if you truly believe CEOs have an insignificant effect, I encourage you to invest in companies with CEOs who are perceived as being terrible.
These results came from data that compared CEO remuneration to average employee remuneration.
Your linked study provides very weak support of these claims. It's restricted to bank holding companies and thrifts during the financial crisis. In fact, there is a pretty obvious alternate explanation of it's results - banks with a high pay ratio consist of a CEO + lots of tellers, mortgage officers, etc (e.g., Citi, Countrywide). In contrast, banks with a lower pay ratio consist of CEO + quants, traders, etc (e.g., Goldman, Morgan Stanley).
Can you think of another reason why banks with lots of mortgage officers might have performed worse during the crisis?