Peter Drucker said no executive should make more than 20 times as much as a company worker.
He was speaking in 1982. He was spot on then and his point stands today.
I’d phrase things differently:
No executive is worth 20 times the pay of ordinary workers.
So why are companies willing to pay some executives many hundreds of times the pay of ordinary workers?
It isn’t because they deliver shareholder value, there’s almost no link between company performance and executive pay.
John Mackey at the Harvard Business Review says:
If CEO compensation is primarily driven by competitive markets, then how come the ratio was only 24 to 1 back in 1965 and is about 300 to 1 today? Surely the market demand for good CEOs is no greater today than it was 45 years ago or 25 years ago. Are CEOs today really worth that much more than their comparable peers were worth just a few decades ago?