I think the fundamental misunderstanding here is that "record profits" have anything to do with executive salaries. Salaries are a cost. There's an association

I think the fundamental misunderstanding here is that "record profits" have anything to do with executive salaries. Salaries are a cost. There's an association and correlation, though. It's easier for executives to ramp up their compensation if the company is profitable. So if an executive can do something short-sighted that improves profits in the short term, or even something degenerately risky that may turn a huge profit. Principal and agent usually break (that is, their interests diverge) at the second moment (risk/variance). Everyone wants profit/expectancy (first moment). There's no tension there; who doesn't want to make money? Risk is a nother matter. Principal usually wants as little risk per unit upside as possible; agent typically wants more risk because upside leads to higher compensation but the difference between a small down year and a big one is minimal. For example, a hedge fund manager collects 2% of assets managed and 20% of profits. (If profits are below zero, redemptions happen and that often kills the fund.) So a return of -30 and -10 have the same effect-- shit year, no bonus, everyone gets fired-- but the difference between +10 and +30 is huge. That's why a lot of these firms take degenerate bets. Someone else eats most of their losses, but they get a lot if they win. Executives work the same way. They push for huge initiatives that add risk to the business. Big wins makes them rich, little wins make them comfortable; the difference between little losses and big losses, for them, is zero. They have no reason not to take big risks with the company. Large-scale cost-cutting is especially good from an executive perspective because the benefits are immediate but the problems it causes tend to show up in the long term, giving the executive time to flee if the results are bad.