Preface:
I want to be very clear that I have vastly different views about guys like (1) Ellison, Buffett, Gates and others who found firms and afterwards realize huge returns from having done so, and (2) CEOs whom firms hire and who are "mere" employees.
- The folks in "Group 1" rightly deserve however many millions/billions they get, and what they get -- "in the end," so to speak; not what they get as "salary" -- should, IMO, have little to nothing to do with employee pay. It's their firm; they're thus entitled to make a boatload from it. I'm not about to say what compensation a controlling/founding owner of a firm should or shouldn't reap.
- The folks in "Group 2," IMO, deserve very good compensation; however, I think their compensation and that of all the firm's other employees needs to be granted in recognition of a host of equitability factors that don't apply to founding owners.
There is a huge contextual difference between the folks in those two groups of CEOs. That said, that contextual difference doesn't factor into my equitability assessment of the disparity in compensation packages banking (or many other) CEOs receive and that given to their "lesser" brethren in the same firms. It doesn't because such CEOs are just part of the hired help.
Main Post:
In the abstract, I haven't a problem with banking CEOs' huge compensation packages; however, regarding the compensation structures at major US banks, there's a real problem. The problem is that even as
banks saw 135% profit increases between the Great Recession and the present, haven't allocated to their rank and file employees an equitable share of that increase, yet CEOs have received at least an equitable, if not more than equitable, share of it.
Without very closely examining each bank CEO's specific undertakings on behalf of his/her employer, I can't say whether any given CEO is overpaid or not. But the problem isn't whether CEOs are overpaid; it's whether the folks far below are underpaid, particularly with regard to their employer's ability to pay and yield fine returns for the owners. When rank and file employees aren't paid enough so that even if they life frugally they simply cannot make ends meet, yet their employer realizes tens of billions in net income, the firm is simply not being fair. Simply, the cost of paying employees enough so they can make ends meet, in the locale where one employs them, is a cost of doing business and it needs to be treated as such.
Moreover, there's no way round it being absurd to think a firm (bank or otherwise) compensating its CEO with a $20M/year package attracts any better CEO talent than does one that offers but half that or even a quarter of that. I mean, really. After a couple years of $5M/year compensation, one effectively runs out of "quality-of-life" things to buy, unless one literally has no sense of restraint. At that point, about all there is to do with one's money is invest it to make it grow. Even well below those sums, factors other than gross compensation drive one's choice to work "here or there," because at a certain certain level, one's lifestyle doesn't get better because one earns more.
In the two-million-dollar-plus annual income levels, more income merely increases one's net worth, which is retained earnings, and retained earnings have nothing to do with the quality of life one lives. Folks with $50M net worth don't "sleep more soundly" than do folks having $500M or $5B in net worth. Why? Because at all three levels of wealth (net worth), one can afford a very pleasant lifestyle, one whereby the only things one might not be able to afford are so extravagant as to be irrelevant to one's quality of life.
For example...Access to transportation is a quality of life factor. One can say that having access to personal instantaneous on-demand transportation makes for a better quality of life than does not having such. So, for most folks, having a reliable car makes for a better lifestyle than does not having one; however, having an S-Class does not make for a better lifestyle than does having a Malibu. The MB may make one's life feel more luxurious, but it doesn't make one's life better. At some point between an Malibu and an S-Class, one moves from the point of one's car improving one's quality of life to it being a mere indulgence pursued because one can.
The same lifestyle law of diminishing returns applies to everything else money can buy. Because it does is why firms like the banks the OP-er noted should cease with the "CEO pay race" and instead race to make sure their rank and file employees aren't struggling to make ends meet.
