Much of this can be accounted for by the simple fact that the companies have gotten bigger. Top CEOs are in charge of more people than ever before. Walmart has 1.4 million employees; if their CEO makes $35 million that's $25 per employee per year - a penny or so per hour per employee.
If a good CEO's decisions can make the average employee more productive (or less unproductive) by even few cents per hour of employment, he's worth that magnitude of salary when working for a company that big.
If we highlight the CEO-to-employee multiple, companies could game the metric by splitting into smaller companies that are slightly less efficient. For instance, there could be separate regional chains called "Walmart West" and "Walmart East", each with their own CEO who gets paid half as much for doing half as much work. They could even both hire the same guy and have him work both jobs at once, thereby reducing to a previously-solved problem! Or they could actually hire two distinct CEOS, which benefits the employees not at all - in fact, the employee situation might be made worse in various ways by the change - but at least the multiple would officially look smaller so: yay?
Headcount isn't really relevant. My dad was a director (mid level manager) of a government org with something like 1,500 direct reports. He probably made the equivalent of $120k today. I think the salary differential between that gig and a line manager was 30-40%. I manage a big IT organization, manage a huge budget, 50 engineers. I make less than 5x the lowest paid employee. My boss's boss maybe 40% more than me.
The corruption of governance and a sense of entitlement fuels CEO salaries. End of the day, the CEO of WalMart doesn't deliver $35M of value. His decisions have big impact, but there are dozens of people who can make those decisions, and many could do so for far less.
The average CEO makes about the same amount of money as the average dentist. When you get to the big scary numbers, you're talking about the top 100 highest-paid CEOs, not CEOs in general. Out of about a quarter-million CEOS around the country, a very very few of them are managing companies the size of Walmart and it's not at all obvious (at least, not to me) that those few are being overpaid.
> there are dozens of people who can make those decisions, and many could do so for far less.
Sure, or you could make the decisions by having a monkey throw darts at a newspaper for free. The important question is whether those dozens of people earning less would make as good decisions as the one currently doing the job. If the current CEO's decisions are even very slightly better he's worth the money given that level of scale.
Similarly, there are dozens of people who could play basketball for less so there was no need to pay Michael Jordan the big bucks.
It's a small club, so there isn't an incentive to make waves.
Marissa Mayer is on the Walmart board. H. Lee Scott, former Walmart CEO is on the Yahoo board. Why would Mayer want to make a stink about the Walmart guy's salary, an awkward conversation that would probably lead to a similar awkward conversation when she wants a raise at Yahoo.
The boards that I've seen (at a smaller scale) that work are ones where there is a diversity of interests. The minority political party member making a stink about the majority in a town board. Or the company board where a representative of labor controls a key committee.
If a good CEO's decisions can make the average employee more productive (or less unproductive) by even few cents per hour of employment, he's worth that magnitude of salary when working for a company that big.
If we highlight the CEO-to-employee multiple, companies could game the metric by splitting into smaller companies that are slightly less efficient. For instance, there could be separate regional chains called "Walmart West" and "Walmart East", each with their own CEO who gets paid half as much for doing half as much work. They could even both hire the same guy and have him work both jobs at once, thereby reducing to a previously-solved problem! Or they could actually hire two distinct CEOS, which benefits the employees not at all - in fact, the employee situation might be made worse in various ways by the change - but at least the multiple would officially look smaller so: yay?