Oracle's Larry Ellison has been one of the most highly paid CEOs in recent years.

Oracle's Larry Ellison has been one of the most highly paid CEOs in recent years.

The companies that pay their chief executives the most see the worst results for shareholders, according to a new study, with an average annual shareholder loss of $1.4 billion at the companies with the highest CEO pay. Exorbitant CEO compensation packages breed overconfidence, study authors Michael Cooper, Huseyin Gulen, and Raghavendra Rau write, and overconfidence leads to bad decisions about weakened business performance. Contrary to the common claim that paying executives in stock will improve their management of a firm, the study finds that CEOs who are given non-cash incentive compensation actually perform worse. The negative effects of excess executive pay linger for three years and drag shareholder returns down by between 8 and 11 percent for companies with the most lavish CEO pay packages.

Companies supposedly "need" to pay their CEOs and other top executives giant, obscene piles of cash and benefits in order to attract top talent that will propel those companies to ever-greater success and profit. And giving CEOs lots of stock options supposedly ensures their best performance, because they stand to profit personally from good stock performance. But according to a new study, that and a load of other corporate conventional wisdom about CEO pay is just plain wrong The researchers came to these conclusions after looking at 17 years of compensation and performance data. It's striking how many elaborate justifications the corporate world has produced for higher CEO pay without looking rigorously at the results, while applying the opposite logic to justify low pay for rank-and-file workers. It's almost like it's mostly about coming up with excuses to pay themselves more and everyone else less. Scratch that, they're totally just coming up with excuses.