But isn't this logic applied to average CEO pay, which has gone up many times faster than productivity? CEOs work isn't any more demanding than it used to be, either.
When they get removed, they often receive golden parachutes even if they seriously effed up the company.
This can't be explained by return on equity. I guess it can be explained by bargaining power or cronyism, or perhaps other things I'm not thinking of.
True often the golden parachutes are way too high compared to realistic performance bonuses. But if you think of that as insurance - the board and the CEO both know this is risky, so they negotiate a fixed golden parachute just in case it doesn't work out - otherwise why would someone who wouldn't get fired take the job, since they wouldn't want to risk the downside?
Microsoft’s market capitalization has more than doubled during Satya Nadella’s tenure as CEO. When Steve Ballmet quit as CEO the market cap jumped over $100 million. That kind of difference is why companies pay extremely well for top CEO talent. Management is a skill, some people are really great at managing large, complex, profitable organizations and they’re worth a lot of money.
So a big reason CEO wages grew is that companies became massive.
I think it has, actually. The CEO's job became more complicated as a result of the increased complexity in the world. There used to be only brick-and-mortar and mail order, now there is internet. They used to advertise on tv, radio, and newspaper. Now they can advertise tv, radio, newspaper, online ads, and social media influencers. They didn't have to worry about ransomware, now they do. And so on.
If we measure a CEO’s job difficulty based on how many years a typical company in their industry can safely operate while stagnating, then the job has become many times more difficult in the last 40 years in some industries. In others, perhaps only twice as difficult.
That is not to say that salaries should stay high, but we would look for reduction to come from systemic productivity gains in management that have come to other white collar professions: software, more efficient management hierarchies, cultural changes in communication, etc.
I’m certain that they delegate those issues to subordinates; do you feel that there is skill involved in managing and supervising subordinates, and melding their disparate opinions into a coherent and profitable direction for the company?