CEO compensation is often disconnected from traditional supply and demand dynamics or direct value creation, and that's a problem. 1. They set their own pay

CEO compensation is often disconnected from traditional supply and demand dynamics or direct value creation, and that's a problem. 1. They set their own pay CEOs determine their own pay packages or have influence over the decisions of compensation committees. 2. Their compensation keeps escalating higher and higher over time, beyond reasonable impact to performance Companies benchmark their CEO's compensation against that of peers in similar roles at other companies. This leads to a "race to the top" effect, where CEOs' pay keeps escalating without direct correlation to company performance. 3. They're rewarded for short term gains CEO's often have bonuses driven by short term stock performance, so they can game their decisions to maximize their own pay over the companies long term benefit. 4. Who is considered for the role of CEO is artificially limited Only people with experience managing a slightly smaller company are considered qualified. This makes the pool of candidate small, which allows them to justify a high pay. 5. They're an inner club Eventually, it's CEO's hiring CEO's and setting each other's pay. It's normal that they all eventually decide to pay each other more and more. As CEOs are on boards and board members are CEOs.