In my experience the CEO does three things uniquely that other roles don't:
1. They are the ultimate authority in tradeoffs between internal interests; 2. they are the interface between ownership and the company; and 3. they are the driver of strategic change.
When the whole company is aligned and rolling downhill with product-market fit around a single offering, those functions aren't as necessary. It just works. When you start branching out, you need a final referee that can determine the exchange rate between the desires of internal kingdoms.
But it's the second and third functions that IMO drive the executive compensation bubble. Our economy is kind of hourglass-shaped, with an economy of wealthy asset owners barely joined to an economy of consumers. The thing that is supposed to tie everything together is that the value of the assets owned in one of the bulbs is tied to DCFs of the money circulating in the other bulb. The CEO is at the narrow opening between the bulbs, mediating between the investors in the equity-class-relationships economy and the actual operating business in the actual-humans-buying-things economy.
There has always been a "strategic" layer that insists upon its own inevitability, the BCG/Bain mindset that says that things can't just run on autopilot and someone needs to be looking Towards The Future. For any given company there's going to be someone out there who has an investment thesis for how that company could make more money with some changes, using whatever that decade's version of the Cash Cows/Dogs/Stars matrix is.
What's different (IMO) is the massive amount of inflation we had only amongst the asset owners, that hasn't until recently been matched by inflation in consumer sectors. Valuations have gone up simply because there is so much money to invest, and investors have been given basically two options: keep your money in cash because equity is over-valued, or believe someone with a thesis of how a company with a NPV of $300M can actually be worth $1B with a few changes. The CEO's job is to prevent the uninflated DCF from fully decoupling from the inflated company valuation.
So we get all sorts of businesses that are doing fine for what they are, but not doing fine enough to justify their new valuation. At a macro level it's driven by QE2 and other Fed schemes, but for this one particular company it's an intriguing and reasonable idea. Now the investors put the CEO to work implementing the thesis that will will justify the valuation premium. I think that's the driver behind a lot of the exec comp and the flailing about.
