23 Things they don't tell you about Capitalism

Although some top managers are paid very high salaries, free-market economists insist that this is not a cause for concern because such high pay is necessary to attract and reward top talent. The assumption is that people who are paid more must be more productive than other workers.

Up until the 1970s, chief executive officers (CEOs) typically earned 30-40 times as much as an average employee. This figure has risen sharply since the 1980s: Some CEOs made as much as 400 times as much as the average employee in the 2000s. During the same period, worker pay remained virtually stagnant. Chang questions whether today’s CEOs in the US (and in Great Britain, where pay follows a similar trajectory) are really 10 times as productive as their predecessors in the 1970s. Some suggest that high CEO pay is due to the increasing size of businesses, but this fails to explain why executive pay suddenly jumped in the 1980s or why CEOs in other countries are paid much less than their counterparts in the US and Great Britain. Others suggest that market competition will weed out companies that are wasteful, which may be true, but excessive CEO pay has continued for decades.

Chang suggests that the power and influence of the executive class is responsible for this phenomenon, as the high pay packages of even failed CEOs during the 2008 financial crisis demonstrate.