Shannon Love explains why corporate executives get the big bucks:
If you want someone to run your company for your interest you have to pay them more than they could make running their own company for their own interest!
Admittedly, this a concept as complicated as quantum physics for some people but I will try to boil it down.
If someone has what it takes to run a major corporation, they have what it takes to run their own business. If someone has what it takes to convince a bunch of investors to hire that person to run the investors’ business, they have what it takes to convince a bunch of investors to invest in that person’s private company.
High executive salaries trace back to investor groups buying private companies and then paying the original owner big bucks to stay around and manage.
The reason that American executives continue to pull down so much dough relative to the rest of the world is that in America you can walk out the door, start your own business and rise to the top of an industry. You can’t do that in corporatist systems like those in Europe, because the state protects large corporations from internal and external competition. It is much, much more difficult to grow a business into a giant in Europe than in American. That lack of freedom reduces the choices of executives and keeps executive compensation down.
If you want to live in a country where executive pay is low, you have to live in a country like France where the top 30 biggest companies in 1970 are still the top 30 biggest companies today. In America, 20 of the top 30 companies today didn’t even exist in 1970. As long as small companies are allowed to succeed big and big companies are allowed to fail, you will have high executive pay.