re: #269 danarchy

If your only talking about fortune 500 companies your numbers are right. The majority of CEOs in the US are not fortune 500 CEOs.

While I agree some of their compensation is way out of whack with their actual performance, much like a sports team signing top pro athletes or a producer signing a big star to his next movie, you are always taking a chance signing that contract. Why should a CEO being hired to run a company with billions or 100’s of billions in revenue not be paid as much as Tom Brady or Tom Cruise?

That is essentially the ‘skimming’ model of CEO compensation that has become the norm at big corporations. As long as what the executives rake off is small compared to total revenue or total profit, very few people see anything wrong with it.

To answer the question, pro athletes have short careers and the marketplace does take their talent (or lack thereof) account, at least imperfectly. Actors can have longer careers, but their performance still matters in a way that CEO performance typically does not.

In contrast, the typical CEO compensation model in a US big corporation is to pay the CEO the big bucks each and every year in ways that are pretty much independent of the performance of the company or of the CEO. For example, executive stock options are routinely repriced when the company stock price goes down making prior executive options worthless.