> A CEO, however, does not make products generally. Nor does he come up with new things. He's a face, a leader, and not much beyond that. He could easily be replaced with an algorithm - if humans were receptive to that. They're not, unfortunately. So for now we need a warm body. Who that body actually is... meh, not really important. Best case, pick someone tall, white, and handsome. That usually works out.
And yet, we see companies opt for highly paid CEOs.
Sure, you can claim that boards (or whoever picks CEOs) to be all in cahoots with each other. But we also don't see greedy, activist investors racing each other to force companies to replace highly paid CEOs with the kind of anonymous dolls you describe; even though they are otherwise quite happy to clash with incumbent management, and even replace them wholesale, when they get control. Usually with some other highly paid and experience people.
Do you have any hypothesis as to why?
> I would agree that pay not being proportional is common because as you get closer to the skill ceiling the job becomes more difficult. You need more amount of effort/expertise/knowledge per unit of skill.
I'm not sure that's the right argument to make. I can't look into Usain Bolt's mind, but I don't think he'd be paid any less, even if hypothetically his running wouldn't take him any effort at all?
For the other two (expertise and knowledge), how would you define them in such a way that your statement is not circular?
I tend to see this as more of a case of marginal contribution. If you have a big, complicated machine that needs a tiny screw somewhere to work, and a normal screw costs 5 cents, but there's a fancy screw that enables the whole machine to be 1% more productive, the fancy screw might be worth up to ten million dollar a year, if your machine's output goes from 1 billion dollars a year to 1.01 billion dollars a year.
(I say 'up to', because in practice it depends on the supply of fancy screws. If there are lots of suppliers in the market, competition will drive their price down to close to production costs, even if they still give you ten million dollar in increased productivity.)
Similarly, perhaps a brand name CEO would only increase output by 1% over your hypothetical anonymous handsome guy, but that might still be worth millions a year.
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In any case, I would be quite baffled if famously greedy and supposedly short-termist shareholders, would leave money on the table by not replacing name brand CEOs with some anonymous doll, if that worked as well as you suggest.