Global trade shocks reveal how much a good CEO is actually worth — 100x their salary

A new study using Danish company data found that when trade shocks hit, CEO pay rises not because the CEO worked harder, but because their ability to navigate volatility becomes more valuable. High-ability CEOs create more than 100 times their compensation in additional firm value during these disruptions, meaning their salary is tiny relative to what they actually generate.

For decades, economists have argued about whether CEO pay reflects actual value creation or is just compensation inflation divorced from performance. This paper offers real evidence from a natural experiment: when external shocks force companies to adapt, you can measure what a skilled executive actually contributes. It turns out that a CEO's real value isn't in steady-state management — it's in damage control and upside capture during chaos. This matters because it reframes CEO compensation not as a moral problem but as a scale problem: the bigger and more volatile your company gets, the more a good executive is worth, and the more you'll pay them. That doesn't make high CEO pay wrong or right, but it does explain why it exists and keeps rising.