When, in November last year, Jeffrey Immelt said that paying chief executives wildly more than their senior managers was “lunacy”, he probably did not realise he was opening a fresh debate on a thorny issue for corporate America.
Since those comments by the head of General Electric, the question of “internal pay equity” – the gap in compensation between chief executives and their most senior underlings – has climbed up the corporate governance agenda.
After years spent focusing on the value of the princely pay packages commanded by corporate leaders, shareholders, and to a certain extent regulators, have begun looking at boardroom inequality.
Their argument is that a large differential between those at the top of the ladder and those just below – chief financial officers, division heads, or even superstar sales executives – is a symptom of deeper malaise.
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