CEOs of public companies tend to be internal hires, while CEOs of private equity backed firms tend to be external hires. In private equity, firm specific CEO human capital (i.e., CEO skills relevant to the current employer only) does not appear relevant, while industry skills are highly relevant.
PE-backed CEOs are paid significantly more than CEOs of similarly sized public companies, and only slightly lower than S&P 500 CEOs despite running smaller firms. Credible options outside of public companies for CEOs may be what keeps remuneration high, even when they don’t have skills that are relevant to their current firm only. Given the overlapping hiring pool, it isn’t clear why hiring patterns differ for CEOs in public and PE owned companies.
Source: Gompers, Kaplan & Mukharlyamov (2023). NBER Working Paper No. 30899.
