I'm happy to use the tax system, G. Other ways of fixing the problem mean changing more moving pieces.

However. I'm not convinced with the original argument. i.e. That a really good CEO can bring in billions more than a merely good one, and therefore deserves millions more. The counter-evidence is easily seen by comparing across borders. Other countries did not see this kind of escalation in CEO pay, and yet were often dealing with firms just as large - e.g. Japan, Britain, Canada, etc.

Then there's the unprecedented destruction of shareholder value which has occurred. Somewhere in the shareholder-management-Board chain, the information links got broken. (As well as with wider interested parties, the public, the Government, etc.)

So, yes, tax 'em. But that's a pretty blunt instrument. If we're going to fix it long-term, somebody needs to do the dirty work of isolating, connecting & rethinking the various factors that went into hyper-pay for CEO's.

Good to see you, dude. I'd argue with you at Dag, but somehow, I feel safer here. You know, that Indiana-based Dagger is a bit savage, eh? ;-)

"Somewhere in the shareholder-management-Board chain, the information chains got broken."

Ding ding ding - there is your answer. Thank you Mr. Q.

It must have been at least 8 years ago I read a piece about how the boards of the biggest companies were being stacked and we were going to start seeing excessive compensation. The arugment made was there were only so many people sitting on the boards and it was becoming a back scratching party kind of thing.

The way that things are SUPPOSED to work, the shareholders should have been aware of what was happening, but they weren't. If they had the info they were ignoring it as long as they got their dividend checks. The shareholders accepted it. The only time caps on pay should come in situations like we have now. If the shareholders find it acceptable to pay outrageous salaries when the company tanks, well what can I say. But once again, using taxpayer money allows for the caps in THIS situation. I don't see how excessive taxing over a certain amount of money prevents poor performance getting excessive compensation.

What I think will be interesting is what our social-economy will look like when this 'crisis' is over. Will Americans give up their worship/fasination with the rich? Anyone read the NY Times bit about people giving up refridgerators?

I read a sci-fi story about a future society that was built on consumption. The more money a person made the more they HAD buy and use. The goal became being able to afford robots that would use up the things you had to buy so you could buy more. Guess what the people at the top got to do? They didn't have consume anything! They didn't have to worry about how many robots they had and if they were working and how much stuff they had to consume. That story was written in the 1950s if I remember right. I think about that story a lot, espcially now.

This is interesting and I'm glad to see this man take such a stand with respect to taxing CEO's like himself, but the idea that "A list" businessmen can somehow almost guarantee performance is false on it's face and simply doesn't stand up to scrutiny given that the entire American business world is on it's knees as a result of all these A'listers and how well they've performed.

I think a much simpler explanation is far more accurate and obvious. CEO's of any longevity pack their Boards of Directors with members friendly to themselves and their interests. This is not a secret. They often sit on eachother's boards and they reward eachother handsomely.

Like the King's of old Europe they develop all manner of convoluted rationale for the obscene cut they take from he business for themselves not unlike the development of the theory of the Divine Right of Kings to justify and unjustifiable claim of hereditary sovereignty. The divinity in the case of unjustifiable business claims is, of course, the omnipotent invisible hand of the divine "market." They dress up their grotesquely distorted money grubbing in nice sounding and lofty theories but the CEO's greed is no different than anyone else's. One hand washes the other. Boards are not necessarily controlled by appointing other CEO's but they typically appoint people (CEO's or otherwise) who have a connection to themselves, whose predisposition is friendly toward the CEO, etc... The appointment itself is often a reward to a friend of business ally. They also pay these people absurd amounts of money to sit on these boards and simply show up. The payments are often in the tens of thousans simply for attending a single board meeting! Good work if you can get it.

That power corrupts is an axiom universally accepted when used in reference to governmental power. It is self evident that power considered more widely is always corrupting and thus corrupts corporate CEO's and their Boards of Directors just as readily as the people who run governments. The corruption involved is not classic or the intended outcomeof the design of boards of directors but it has turned into a pretty sweet deal for those who get to run the table because there is no effective check or balance on them given the self serving way corporations operate.

In the end, this corruption is an unavoidable and integral part of the system. By protecting their personal and business interests with the installation of friendly and compliant board members they create a self-fulfiling prophecy in which they are rewarded even when they fail. Just look at the obscene bonuses being paid to CEO's who have driven their companies into the ground on Wall Street.

It isn't a conspiracy theory to view the situation this way. It's simply an acknowledgement of what is plain to see and the human weakness of the arrangements involved. It's too chummy. There is little or no diversity in point of view or interest amongst board members. The myopic consideration of this quarter's results uber alles vs long term viability and performance is a known weakness of the typical corporate model. Unrestrained greed enabled via pursuit of immediate profits alone is not a viable strategy for the long term health of any enterprise. All of the things above are fatal weaknesses present in most corporate structures. These flaws produce the distorted and totally unjustified salaries of the "Masters of the Universe" and other CEO's who no more deserve the money they receive than the man in the moon. Yet another synthetic construct designed to explain the absurd and unjustifiable salaries of CEO's isn't necessary and only serves to obfuscate the truth. The very idea that there is some magic and unknown "market" somehow setting CEO salaries is laughable. They and their friends and colleagues are their own market force. It's a fix, don't ya see?

At least actors and athletes produce as unique individuals whose performance simply cannot be copied because they are the only them that there is and their performances are quite literally unique. Nothing CEO's do is unique to themselves except the falacious arguments that justify everything they do no matter how stupid, harmful, shortsighted, destructive and even criminal in some cases.

Now whatever the reasons or rationale I certainly agree we should tax the hell out of these people and other wealthy people so they pay their fair share at long last (and the indolent rich as well) since they've been unjustly enriched by the government and the ladling out of money to them for years has been a primary cause of the near bankruptcy of the United States. But let's not fool ourselves with a bunch of mumbo jumbo about these guys being A-list anything other than fast-talking, aggressive, greedy, selfish, self-promoters who don't give a damn about anything but getting rich.

I would also suggest fixing a formula upon which to base the pay of CEO's tied to a fixed multiple of the average wages paid an employee in that particular company. And why can't we just eliminate bonuses altogether for CEO's and upper management? The whole idea that they need incentives for some reason where others do not is another absurdity in the business world. Why not make it so that all bonuses are distributed equally across the board to all employees of a given corporation? After all, CEO's are only employees. They are not owners of a family business.

Give the big ceo bonuses to all those at these companies making $40,000 or less.

Just divide it up and distribute evenly.

A lot of folks are commenting about corrupt boards, but no one has presented any evidence of the breadth of this problem. For such corruption to artificially inflate compensation packages across the board, it must be widespread. While such cases certainly exist, you need more evidence if you want to prove that the phenomena is widespread.

As I wrote at dagblog, I do believe that the government should regulate board liability and shareholder power, but I believe that the government's ability to straightjacket the boards is limited and that it's unlikely to much impact on executive compensation in any case.

I just wrote a very long comment and submitted it but it seems to have vanished into the ether. Ugh. Maybe I saved you all a bad read. I think I violated the "three links" rule.

Seething over my own screw up and the arbitrary and unannounced limit of links per comment that has, I admit, f***ed me over once before, I will summarize my brilliant points.

1. Hello Genghis. Good post, which goes without saying.

2. CEO compensation is only one manifestation of growing income inequality. In 1976, the top 1 percent took home 9 percent. In 2006, they took home 20 percent. It's not just the difference between the CEO and the factory/office floor. The sociologist Dalton Conley in Salon observed (no link this time, evil administrator): "Economic inequality overall in the United States has increased every year since 1969. If you break that out and look at the prototypical middle-class family or household -- the 50th percentile, the median -- and you look at the relationship between the median and the bottom half, it's been pretty flat. It's been stable. The middle class is not pulling away from the poor. What's happened is that the top half has been stretched out like taffy, and the further up the slope you go, the increasing incomes have gotten steeper and steeper."

In other words, folks like me who in the past would have been comfortable in our bourgeois existence are now consumed with schadenfreude as we see our erstwhile peers ascend to obscene levels of wealth and power.

3. Higher tax rates at the top are an obvious corrective to the mass income redistribution toward the top that we've seen over the past decades. This would redirect money toward more productive uses such as universal health care and retirement security that have become increasingly tenuous for the middle class. But wait, that's socialism!

4. CEO pay is just a visible symptom of this much larger issue. It's particularly visible as we see the CEOs whose companies have been run into the ground coast gently into the sunset on their golden parachutes.

5. I agree with Quinn and others that this is not just a matter of supply and demand. Take a look at this blog on the NYT. (http://economix.blogs.nytimes.com/2009/02/06/supply-demand-and-executive-pay/?scp=4&sq=CEO&st=cse). In brief, the supply and demand theory rests on two assumptions. First is the "lone ranger" theory of management - that the company's CEO is the main determinant of its capitalization. Of course, if this is the case, we should see huge pay cuts for CEOs whose companies are going down the tubes. Not likely. Second is that there is a limited supply of talented executives. Same problem. Plus, doesn't account for the ridiculous discrepancies between US and European and Japanese CEOs - unless you figure there aren't as many good executives there.

5. This is where I solve the problem of excessive executive pay. Unfortunately, I can't remember this part.