CEOs: The More You Pay Them, The Worse They Perform

MONDAY, 30 JUNE 2014

CEOs: The More You Pay Them, The Worse They Perform


The Peter Principle

“Every new member in a hierarchical organization climbs the hierarchy until he/she reaches his/her level of maximum incompetence”

The Peter Principle states that everyone gets promoted to a level at which they’re incompetent. More generally Lawrence Peter observed that anything that works gets used to do other things until it fails. This is true even of ideas, and sometimes even failure doesn’t stop them being promulgated. Consider, for instance, economics as the primary example of an idea stretched beyond its elastic limit.

But at the top of the corporate tree are those executives who’ve somehow avoided becoming victims of the Peter Principle. Of course, simply becoming a CEO doesn’t disprove the idea, it just makes it more likely that we’ll have lots of incompetent business leaders who’ve become really good at blaming other people. And a survey of CEOs suggests that this is exactly true: they’re overrated, they’re overpaid and they don’t deliver for anyone apart from themselves. Why am I not surprised?



About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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