I was shocked (but encouraged) to read the New York Times yesterday. Instead of writing another article about how CEOs are massively overpaid, dishonest, or both, Andrew Sorkin and Eric Dash make a strong argument that U.S. CEOs are underpaid! According to the article, private equity firms are increasingly successful in luring talented public company executives to run private equity-funded firms. A big part of the reason is that private equity firms pay those executives more.

Consider what this exodus of talented public company executives to private equity-funded companies means. These executives can certainly get hired as CEOs of public companies. If they were so overpaid, they would not leave the public companies. The fact is that many of them are leaving to run private equity-funded companies.

This also suggests that CEOs do not control their boards and get the boards to overpay them. On the contrary, the fact that CEOs are leaving suggests that public company boards may not be paying their good CEOs enough. I am encouraged because it may finally have become apparent, even to the New York Times, that U.S. CEOs, boards, and corporate governance are subject to market forces. In addition to the fact that public-company CEOs can earn more as private-equity company CEOs, here are a few additional observations that suggest that the criticism of CEOs and boards may have gone too far.

First, the CEO job at large companies is less secure today than it has been in any time over the last 35 years. In a recent paper, Bernadette Minton and I show that CEO turnover at Fortune 500 companies has been running at over 16% per year since 1998. This compares to about 10% per year in the 1970s. In other words, a CEO can expect to have his or her job for six years today versus ten years back in the 1970s.

Second, CEO turnover at those large companies is strongly linked to the companies’ stock performance relative to the industry as well as the performance of the industry. Since 1998, that link has been stronger than in any other period since 1970. Said another way, boards do pay attention to a company’s stock performance and have been doing so for quite a while. Contrary to reports that they were unusual, the public dismissals of Hank McKinnell at Pfizer and Bob Nardelli at Home Depot turn out to be very typical of the last eight years. McKinnel and Nardelli each served for only six years or so and both presided over poor stock performance relative to their industries. Pfizer’s industry also performed poorly relative to the overall stock market.

Third, despite much that is written, realized CEO pay is strongly related to firm stock performance. In a recent paper, Josh Rauh and I sorted the firms in the ExecuComp database into ten groups based on realized compensation in 2004. We then looked at how the stocks of each group performed relative to their industry. According to the critics, we should not have found much of a correlation. In fact, we found a strong one. Realized compensation is highly related to performance. CEOs in the top decile of realized compensation saw their firms outperform their industries over the previous three years by more than 50%. CEOs in the bottom decile saw their firms underperform by more than 25%. As you go from the lowest-paid to the highest-paid executives, performance always increases.

Fourth, as Xavier Gabaix and Augustin Landier point out, CEO compensation should be tied to firm size. And firm size has increased markedly in the United States over the last thirty years.

It is a fact that top executives of public U.S. companiesare paid a lot today, and a lot more than they have been paid in the past. The high pay combined with questionable behavior by some CEOs and boards has led the press and some academics to conclude that average CEO pay is excessive, driven by dishonest, manipulative top executives and ineffective boards.

The discussion and evidence above calls that conclusion into question. One has to wonder how overpaid public company executives are when private equity investors (who do not have an incentive to overpay) will pay them more. And public company boards appear to have been more active in managing CEOs than they are given credit for.