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One difference between top executives and worker bees, is that those at the top can lower the pay of those down below, while simultaneously raising their own pay. If you wonder what’s causing America’s rapidly-widening income gap, there it is.
Technically, CEOs do not set their own pay levels, supposedly leaving that to the board of directors. The typical board, however, is a CEO pushover, largely made up of other highly-paid CEOs and brothers-in-law of the corporate boss. But in response to public disgust at the grotesque excess in the platinum paychecks of top bosses, corporations have added a new level of “pay police” to oversee the process – “compensation consultants,” they’re called.
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These specialists are hired to analyze industry-wide data to advise corporate boards on the going rate for top dogs, thus assuring an impartial assessment on pay that can calm public furor. Really? Ha! Surely you joke. Guess who hires the consultant? Astonishingly, the board often delegates that delicate assignment to the CEO!
But even when the board runs the process, the chief’s pay keeps going up, up, and away. One reason is that board members like to brag to their country-club peers that they have the hottest of hotshot CEOs, and you don’t prove that by paying chump change. CorporateWorld measures everything by money, so its cultural ethic dictates that a top-notch top dog is defined by a spectacular level of pay, and the “best” is the one who commands the most.
The contrived, self-serving corporate dogma that multimillion-dollar executive compensation is determined by the invisible hand of the mysterious marketplace is pure P.T. Barnum – Elmer Gantry – Wizard of Oz hokum. A truer system of establishing a CEO’s worth would be the old pirate system – let every worker on the corporate ship vote on it.
“More Transparency, More Pay for C.E.O.s,” The New York Times, November 11, 2014.