They don't have to. The pay is set by the BOD. And the executives sit on each others boards. Not being total dimwits, they realize that if they compensate high, then chances are their own compensation goes up.
Totally simplistic. You're taking a complicated subject and trying to address with a single sentence.
First, it isn't exactly true; while many people sit on multiple boards, most boards also have people who are either highly invested in the one company, serve it in some advisory capacity, or have other business relationships with the company. For example, it is common for creditors to have a seat on the board, and their interests are obviously adverse to the arrangement you suggest.
More significantly, one has to have a very large helping of cynicism to get to this point. Most of the boardmembers, typically, respect the fiduciary interest and act accordingly, to the best of their ability.
Finally, these ARE very valuable individuals to a business. Perhaps not worth what they're paid sometimes -- but a guy who runs, for example, GM, is not a dummy, even if he makes mistakes. He is one of a select few who are capable of doing that job. So, substantial compensation is called for. And imposing limitations has to be done carefully so as to not muck up the situation in the process. |
