According to Kim Clark, Dean of Harvard Business School, the use of consultants has created a "Lake Wobegon effect" in CEO pay, where CEOs all consider themselves above average in performance and "want to be at the 75th percentile of the distribution of compensation." Thus average pay is pushed steadily upward as below-average and average CEOs seek above-average pay.[21.Harvard Business School Dean Kim B. Clark, prepared remarks, National Press Club, February 26, 2003] Studies confirming this "ratcheting-up effect" include a 1997 study of compensation committee reports from 100 firms."John Bizjak, Michael Lemmon, and Lalitha Naveen reviewed the 1997 compensation committee reports of 100 firms in the S&P 500 index. They report that the "vast majority" of firms that use peer groups set compensation at or above the fiftieth percentile of the peer groups." [19.Bizjak, John M. Michael L Lemmon, and Lalitha Naveen, 2000, "Has the Use of Peer Groups Contributed to Higher Levels of Executive Compensation?" Working paper, Portland State University, the University of Utah and Arizona State University A 2012 study by Charles Elson and Craig Ferrere which found a practice of "peer benchmarking" by boards, where their CEO's pay was pegged to the 50th, 75th, or 90th percentile—never lower—of CEO compensation at peer-group firms. And another study by Ron Laschever of data set of S&P 900 firms found boards have a penchant "for choosing larger and higher-CEO-compensation firms as their benchmark" in setting CEO pay.
