The Curse of Extremes: Generalist Career Experience and CEO Initial Compensation

Studies argue that generalist CEOs are more valued by the market for executive labor and receive higher initial compensation. Challenging this prevailing assumption, we acknowledge the drawbacks of extensive career mobility and predict an inverted U-shape relationship between CEO generalist career experience and CEO initial compensation. Integrating the generalism and specialization views of human capital, we postulate that at an initial level, the acquisition of experience-breadth from different firms and industries enables CEOs to broaden their knowledge-base, obtain a variety of skills, and thus increase their labor-market value and initial compensation. After a threshold, however, the accumulation of extensive levels of career generalism through frequent job-hopping across firm and industry contexts gradually causes a lack of experience-depth and insufficient career specialization – thereby triggering lower CEO market-value and initial pay. Data from 197 CEO appointments in large publicly traded firms support our predictions. Our results also show that the observed inverted U-shape relationship varies with factors nested at different layers of context – highlighting the contingent nature of this area of research.