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06/24/2011

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Thank you for summarizing the different global practices so clearly. Most of the articles and research studies on why CEO pay is so high dance around the real issue: CEOs head up the board which sets their compensation.

As for what we do about it, unless a law is enacted in the US prohibiting CEOs from serving as board chairman there's only one thing to be done: Get promoted to CEO and accept a 6-figure salary to set a good example. Then, while the other CEOs are busy laughing, steal their wallets.

Different nations have different traditions and different rules on executive compensation. For example, there was a June 13, 2011 article "Ghost of Enron Wreaks New Havoc on Exec Pay" @ http://www.cfo.com/article.cfm/14581582?f=home_featured explaining the iatrogenic nature of some recent U.S. fixes to the tax code like section 409A. Without going into the technical details, corrections in one place can have unintended complicating effects in other places, disrupting normal long term reward programs selected by outside third party compensation committee members who represent shareholders rather than the CEO.

Must agree, overall, that movement towards the center is a universal trend; but that is not always good. When some economic systems have extreme outliers, the center point can be tilted badly. Even mainland China executives are now demanding pay comparable to that received by Americans, so "the ratchet effect" is still working against the public interest. Although I disagree about CEOs dominating their comp committees that much, I still have not heard of any CEO anywhere who quit because their board refused their compensation demands... and that's not healthy.

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