A piece on The Conversation (U.K.) about CEO pay describes the situation we have known here for decades. CEO’s are vastly overpaid. The reason, of course, is that they manipulated their Boards of Trustees to become a back scratching club when it came to paying their salaries.
The essence of their argument went that CEOs were underpaid and if their pay weren’t raised “we” would be at a competitive disadvantage. No evidence was given for this claim … because there is none. It is clearly bullpucky, made up out of whole cloth, for the sole purpose of getting themselves raises.
Since over 80% of CEO appointments in major companies (International Fortune 500) come from within, and there is some evidence that such appointments work out better in the long run (in actual performance), I have a suggestion as to how to correct for this malfeasance.
When your CEO is retiring, or you just hate the bastard and fire him, offer the position to the next in line with a 20% pay cut. Explain that if the next in line turns them down the position will be offered to the person beneath him and so forth. He will accept the position. Obviously underlings can’t be paid more than the CEO so all executive salaries need to be adjusted downward.
Declare a moratorium on executive pay increases. Your shareholders will thank you. Your employees will thank you. You executives won’t but they’ve been overpaid for years, so they should just shut up.
When each CEO leaves, repeat the process, until matters are brought back into line with employee salaries (relatively, of course), such as they were in a benchmark year, say 1980.
As an alternative, you could just pile up all of that extra cash you are overpaying your executives and burn it; that would be about as effective as what you are doing now: paying premium wages for ordinary performance.