There are two major problems preventing a more rational approach to addressing compensation excess. The first is that directors need to stand up and say “enough is enough.” While I do not think for a minute this is an easy task, the current situation will not correct itself otherwise. There are always those who say, “Our guy is doing a good job, and this is the market rate for a good job in this size company. If we do not pay the market rate we will not get a good guy. And, if we give him a load of options or stock, he only makes money if the stockholders make money, so why should we care if he makes a boatload of money?”
We must start thinking around metrics and measurements to help us here, just as we evaluate our companies and all other managerial levels. Are there directors willing to buy into a ratio of lowest paid-to-highest paid — e. g., CEO no more than 25 or 30 times lowest-paid employee? If not, then the starting point may be too high to begin with. Not many directors that I am aware of are even willing to sign on to a ratio of CEO-to-other officers — say, no more than 1.5–2 times next-highest-paid.
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