The Value of a CEO

Steven Ballmer announced today that he would retire. Microsoft stock shot up immediately by ~$2.18 or 6-7%. Given 8.33 billion shares outstanding that’s an increase in value of about $18 billion dollars. Of course that’s embarrassing for Ballmer but the lesson cuts both ways. If Ballmer’s exit and replacement with an unknown is worth $18 billion then hiring the right CEO at $27 million annually, the average annual pay for the 100 highest paid CEOs in America, looks like a bargain. Small differences are a big deal for large corporations, you know like a marginal… something or other.

Hat tip: Justin Wolfers.