Boardroom Barons

What’s the actual value of a good CEO to a big company these days? A million dollars a year? Twenty? Could it be more? The question almost sounds seditious, suggesting the un-American notion of prudent boundaries, that there is a point beyond which an individual’s compensation becomes unseemly.

As market-loving capitalists, we don’t believe there ought to be some maximum salary. We think talented CEOs, like talented athletes or musicians, ought to earn the market rate for their services.

Which is why, of course, we are outraged. There is no free market to price CEO talent. Over the last quarter of a century, bosses at publicly traded companies took over the boardrooms and started behaving as if they owned the place. Then, under the dubious proposition that their pay was being pegged to performance, they started paying themselves as owners.

This coup de corporation led to the age of the Imperial CEO, when directors who theoretically hired and oversaw top managers on behalf of shareholders became sycophantic members of the CEO’s entourage. All checks and balances were eroded, and the ensuing winner-take-all mentality and the cult of celebrity CEOs meant that hired hands could take home hundreds of millions, or even billions.

The breakdown of corporate governance didn’t just translate into egregious compensation. It begat Enron and WorldCom and all the other scandals and the corporate reform movement that followed.

Things have gotten somewhat better. Shareholders, directors and auditors are all more vigilant nowadays -- just ask Michael Eisner, Maurice Greenberg or Carly Fiorina if this is still the age of the Imperial CEO. Some balance of power has been restored.

But boards at some companies are still too reluctant to slam shut the doors to the corporate treasury, especially when it comes to denying exorbitant extra pay to CEOs who have failed to excel. If American capitalism is all about risk-taking and derring-do, it would be nice to see some CEOs join the fun and take the kinds of risk the rest of us do. Too many of them still think they can make out like bandits, win or lose.