I have been writing about the problems of overpaid executives that has lately become so bad that verbiage understand the nature of the problem. Today I see many CEO’s are acting as kleptocrats do – taking food out of others mouths to build their castles. The damage done to everyone else involved is of no concern. Both groups love bankers that flood them with cash for new and larger castles at the expense of the futures of their company (or country).
This paper does a very good job of providing more evidence of the damage done by these kleptocrat CEOs and their apologists.
Are Top Executives Paid Enough? An Evidence-Based Review by Philippe Jacquart and J. Scott Armstrong
Many of the problems with the poor thinking around executive pay stem from the failure to grasp ideas Dr. Deming wrote about decades ago.
The quote from their paper show a failure to understand variation (attributing variation to those near the variation at the time – good marks when the variation is good, bad marks when it is bad). And a failure to understand the organization as a system (the results of any subsystem are greatly influenced by the whole system and the conditions outside the system (the economy, the macro-economic conditions for the industry…). And a failure to understand the theory of knowledge: people should know our brains leap to causation explanations when the evidence doesn’t support it. Then confirmation bias and psychology lead us to accept the data that supports our biases.
You see this just looking at the money heaped onto executives (in addition to the already huge payments taken) in industries whenever those industries (not individual companies, the entire industry) have macro-economic windfalls.