The real reason CEO compensation got out of hand

It is truly a statement of the times we live in that a self-imposed $10 million pay cap is a sign of modesty and virtue. Half a century ago, the median pay of top executives in U.S. companies was 30 times an average worker's salary; by 2005, the ratio was nearly 110. How did we get here?

[From The real reason CEO compensation got out of hand. - By Ray Fisman - Slate Magazine ]

The amount of money top corporate executives cart to the bank each year is outrageous by any measure.


Consider the pay of the guy in the corner office of a smallish company whose total compensation is $25 million, a modest amount by CEO standards. You and I could split that, pay taxes (no cheating or dodging), tithe...and still have enough money to live comfortably for the rest of our lives...and leave generous trust funds for our kids and grandkids (not that they would be appreciative).


The truth is that corporate boards have become Good Ol' Boy Clubs (with a few girls admitted) made up of fellow CEOs who watch out for each other. So they make up excuses to send corporate pay into the stratosphere, while they lament the fact that they've had to cut hundreds of $30,000-a-year jobs to keep the corporate ship afloat. Nevermind that slicing a few mil from executive bonuses would have the same effect on the bottom line.


When I'm King of the World this is what will happen: We'll pass a law that says companies can pay executives as much as they want, BUT the CEO's total compensation can't be more than 25 times as much as that of the lowest paid employee. While we're at it, we'll do away with minimum wage legislation. It will no longer be necessary.


There are lots of other things I'll do when I'm King or the World, but I'd better not go into that now. You'd just throw rocks at me.


–Paul Knue