How CEO pay in America got out whack

“TOO OFTEN, executive compensation in the US is ridiculously out of line with performance…The deck is stacked against investors.” It was with these words that in 2006 Warren Buffett, a legendary investor and red-blooded capitalist, challenged the received wisdom in corporate America about CEO pay. This maintains that bosses deserve generous rewards because these are tightly linked to their companies’ financial performance. Fourteen years’ worth of evidence later the received wisdom is still looking shaky.

“Pay for performance” has been the mantra of America Inc over the past few decades. A small circle of influential pay consultants, compensation analysts and academics has argued that American firms must pay top dollar for top candidates because they compete in a global market for talent. They argue that firms have grown more complex and bosses must know how to manage new technologies and the vagaries of globalisation. The controversial corollary is that pay should be allowed to rise ever higher because superior CEO performance is maximising shareholder returns.

Rise it has—and then some. According to Bloomberg, a research firm, the median CEO compensation at big American firms in the S&P 500 share index reached $14m last year. America’s top earners made far more. Alphabet’s Sundar Pichai received a cool $281m and...



via Business Feeds

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