Many of them are intelligent, but that isn't really the value proposition (though I personally won't hire anyone who doesn't make it past my idiot filter).
The value that an experienced CEO brings to the table, above all else, is broad credibility and access to people that matter. It may sound trivial, but who you know can make or break a startup company. Most industries are fairly close knit communities, and having someone leading your company who knows everyone at the top of the other companies in your industry and who is trusted by those other leaders is worth an immense amount. Most small companies die for lack of traction, and having the right connections can give you all the traction you need. Having a killer idea PLUS access to everyone that matters in your industry is a guaranteed winner. Either one by themselves aren't worth a whole lot.
As an example, I am heavily invested in one very slick telecom startup that has been around for almost three years now. We recently hired a CEO who is personally tight with the executives of half the major telecoms in Europe and North America. His wife is a top executive at one of our biggest competitors in the world. Now, I will grant that he is extremely competent ignoring all his connections, but his connections are what make him a ridiculously valuable asset. The startup is extremely slick technology-wise, but the fact that the management team has inside connections with almost everyone that matters in the business makes it a sure thing. Now in that venture we got the CEO pretty cheap all things considered and it was a 10-bagger for me personally without him. With him, we get another 10-bagger on top of that almost without any additional effort simply because the major players in the industry want to talk to us in no small part because they know the CEO. I'll tell you what: what we are paying the CEO is a hell of a lot less than the value returned to the core equity holders by hiring them.
I've built quite a number of companies at this point, and I can tell you that these guys are often worth the money spent to the chief investors in a company. It is the investors that have to pay the salaries of these guys, so there must be a reason why they okay these hires -- the investors are looking to make a profit. When I first got into this game, I was skeptical. But now that I have quite a bit of experience, I very much understand the value proposition. Business is about making money, and if a CEO can bring 10x his salary in return for the business value, that is a damn good deal. It doesn't matter what that salary actually is. People who don't deliver get fired, and those that deliver return to investors will get paid whatever they ask for as long as they continue to deliver.
I'm a little more anal about the qualifications of a CEO than most -- I'm looking for a CEO right now -- but I can do the math that shows that the price paid is generally worth it.
[Bombast about CEOs and personal fortunes deleted]
[Asbestos suit DONNED. Sarcasm torpedo ARMED. FIRE!]
Yep, that's for that one startup.
Tell me again the additional value Carly Fiorina
has brought to H-P, or Scott MacNealy to Sun, lately?
Oh yes, why has Microsoft stock been more or less flat for
five years despite a, what was it, five-fold increase in
revenue? And why did Microsoft decide to invest heavily
in outsourcing to India as of last summer, when they
had approximately $60 billion in cash and basically
NO DEBT?
Investing that $60 billion in US treasuries --the guaranteed 'risk-free' rate of return, and THEN paying
taxes, you have the money to pay for HOW MANY US programmers instead of third-worlders? And that without
touching EITHER the principal OR the cash flow from
continuing operations.
How about focusing on the same topic (large, established
US multinationals hiring third-world workers to profit
from supposed 'wage arbitrage') as the people posting
questions? </g>