As the debate continues over whether high executive salaries are justified, more studies are trying to pinpoint what factors impact a company's performance during a CEO's tenure.

Interestingly enough, even Harvard Business Review's best-performing CEO of 2015, Lars Sørensen of Sweden's Novo Nordisk, admits that luck was the single most important force in achieving that ranking. 

Walter Frick, a senior associate editor at HBR, writes that luck does indeed play a large role, according to recent research. A Harvard Business School study finds CEOs' impact on company success ranges from just 2 to 22 percent, depending on the industry. Another study from Texas A&M puts the figure at between 4 and 5 percent.

"It shouldn't take a careful empirical study to convince you that CEOs don't get where they are on the basis of ability alone. If that were true, the C-suite would not be so dominated by white men," Frick writes.

But if luck helps a CEO succeed, what gets a CEO fired? A 2014 study by Dirk Jenter of Stanford and Fadi Kanaan at MIT found something interesting: The majority of fired CEOs were sacked for "factors well outside their control." According to the data, Jenter and Kanaan said, CEOs are more likely to be fired during a recession or when their industry is in a slump. Another little gem: CEOs are less likely to be fired for bad luck like economic forces and more likely to be rewarded for good luck.

In conclusion, Frick writes in HBR, CEOs just do not impact a company's performance as much as it appears. The illusion of control over the company is the CEO's best friend--he or she is best served by looking the part and being lucky.

"It's safe to say that CEOs are, overall, a talented bunch, but that's not what separates them from other professionals, nor is it the main reason their firms succeed or fail. Certainly it doesn't come close to explaining why they're so well paid," Frick writes. "Put another way, CEOs matter, just less than many people think."

Published on: Nov 17, 2015