Pay for Corporate Performance or Pay as Social Division? Rethinking the Problem of Top Management Pay in Giant Corporations

Abstract

This article begins with the 1980s and 1990s business and public policy issue about pay for performance, which set executive pay in the United Kingdom and the United States into a problematic about value creation. In this context, it is not the absolute level of rewards that is the main concern, but rather the ways in which pay is connected with corporate performance. The article reviews evidence on long-term trends in remuneration and corporate performance. While the empirics on the growth of CEO pay in the United Kingdom and United States over twenty years show rates of increase that result in ever widening gaps between executive and average pay, the data on performance suggest that such pay increases have significantly outrun any sustained increase in value attributable to management effort. The article therefore argues that executive pay in giant corporations needs to be set in a new problematic of value skimming, which allows small elite groups to enrich themselves in ways that do not directly impoverish larger groups of shareholders or workers.