CEO Pay
Other day in a coffee shop a free enterprise supporting lady was defending CEO pay saying it is supported by free market and pay is determined by market, like the salaries of athletes.
The truth is salaries of performers like athletes are determined by market because billions of viewers watch them performing, when billions vote with their pockets or remotes the salary of a permformer is determined, it is like an everyday American Idol.
Whereas number of people who manage to look at a CEO perform is less. With heavy concentration of stock holding and CEOs performing tricks to please Wall Street it is very difficult to determine what the CEO does is for the benefit of the organization.
Normally pay is for competence and competition, for example an average welder in an organization may get a certain pay and a brilliant welder will get a different pay. Competition may try to pouch the brilliant welder so he/she may be compensated more to be retained. In case of a CEO, the work often falls in grey area, like planning, the value of the work can't be determined so the board negotiates, since the board is not any wise it gives in to the CEO demand. The pay of CEO since is not in direct proportion to any measurable value in many cases the CEO pay tend to resemble Rent Seeking behaviour. This tends to dimish the validity of arguement CEO pay set by the market.
PS: Costco CEO pay is $315,000 and underperforming Sams Club CEO pay is an annual salary of $800,000 and $2 million in restricted Wal-Mart stock
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