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.
If you wonder what’s causing America’s rapidly widening income gap, there it is.
Technically, CEOs do not set their own pay levels — they supposedly leave that to their board of directors. The typical board, however, is a 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.
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 of CEO pay to calm public furor.
Guess who hires the consultant? Astonishingly, the board often delegates that delicate assignment to — who else? — 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.
The contrived, self-serving corporate dogma that executive compensation is determined by the “invisible hand” of the 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.