When more pays less: CEO career variety and CEO initial compensation

Studies show that generalist CEOs with high levels of career variety receive higher compensation. Challenging this prevailing assumption, we acknowledge the drawbacks of extensive levels of CEO career variety and predict an inverted U-shaped relationship between CEO career variety and CEO initial compensation. Integrating the generalism and specialization views of human capital, we postulate that, at an initial stage, the merits of increasingly varied human capital increase a CEO’s value and hence promote higher levels of compensation. After a threshold, however, the drawbacks associated with extensive levels of career variety offset its merits, gradually diminishing CEO value and pay. Data from 205 CEO appointments support the hypothesized relationship and underscore its contingent nature.