I don't think that most managers are money-stupid at all. I think they rightly recognize in most cases that mediocre is far cheaper than great, and the difference might be worth the savings. If you're a manager of an internal IT department, it doesn't benefit you that much to have a kick-ass coder on your team, not nearly as much as it benefits you in your review to have saved that much money in salaries. jsrfded has the right idea, the only place to find proportionate compensation is in a business where the software is the product.