The incentives seem to be of the heads-I-tail-you-lose variety, for all the complex performance pay that it is nominally made up of. Most arguments you do hear seem to apply equally in 1950 or 1980, so why the trend?
The common sense argument that a CEO is so impactful on a company so big, that CEO pay is always worth it inasmuch as it has any kind of meaningful effect on performance. 3% improvement in Yahoo's value is $1bn and you'd imagine the 1st choice CEO is worth at least 3% more that the 2nd. I reckon that kind of thinking plays a big role here.
This kind of money, and the way so many of these packages seem to come with weird ways (eg severance pay) to add 7, 8, 9 figure sums in certain cases seems dangerous. Self interest is naked once these sums are in play and the room for cynical, self interested choices is very wide for a CEO.