Company owners are free to set any type of equitable compensation policies. Certainly for some organizations this makes a lot of sense.

However, for some large organizations like GE or General Motors, setting the top level compensation to 12 times a factory worker's will certainly narrow the "gene pool" of candidates to select from for the next CEO.

Many companies lose their best management to the competition because they don't reward them enough.

Richard fails to mentions that, for most senior executives, the majority of their compensation is performance based. So, if the company does well, they do well. Many of these executives that might make 30 or 40 million per year in good times are now down to their base of one million or less.

Also, many senior executives like Bill Gates, for instance, have a majority of their wealth tied up in company stock. So when we say Bill Gates has a "net worth" of 40 billion dollars - he might have access to a couple of hundred million dollars for personal consumption. The remainder is tied up in buildings and employees that are producing the next great software product.

Sure, boards can be more creative about executive compensation. Rewards should not be given for short term gains at the expense of long term sustainability. Companies should not be allowed to buy back stock in order to boost the value of executive stock options, for instance. Even Steve Jobs was accused of back dating stock options at Apple - yet everyone looks to him as a model of corporate management.

I would be wary of a "one size fits all" view of compensation models. What works for one company like Nau may not work well for others.

Now let's say Nau grows into a large and successful company and the owners decide to retire and sell out to Nike for instance. Usually what happens is the owners walk away with a bag of money and/or Nike stock. They will assure the employees that Nau values will stay intact after the sale. However after Nike buys the brand, they call the shots - that's the rules of the road.

So I'd be interested to learn if the Nau ownership has explained the "end game" to their employees. Will it become an employee owned and managed company should the owners decide to retire or move on to something else?

Personally I would be very suspecting of a company that limits executive compensation. On the other hand, I'd be very suspecting of a company that compensates executives for short term gain or unsustainable performance.

Well, the best person to respond to this would be Robert Hinkley.

But there is a thread running through this comment that suggests that top management is responsible for all things good (and maybe all things bad).

I think the main point of Hinkley's proposal is that management pay should be tied to rank and file pay. As they all work to improve performance and value, all should be rewarded equally. You can set the executive compensation at 10x, 15x or 20x or whatever, but the point is that all are rewarded -- not just the CEO.

Sure, reward the C-level exec's in good years, but also reward stakeholders in proportion.

And the old argument that the best executives won't be lured by anything less than outrageous gifts is bogus. The Japanese have never had any problem attracting the best and brightest with nowhere near the deals American executives get. Just because executive pay has spiraled out of control doesn't mean we can't attempt to correct the problem now with an equitable reward-based system.

Workers are rewarded according to supply and demand.

That way, no one is overly or underly rewarded.

If workers do not agree with what their Executives are rewarded, they should go work for another company.

Stockholders should sell their stock if they think CEO pay is objectionable.

Customers should boycott a company whom they think the CEO's are overcompensated.

For instance, is Bank of America might be overcompensating incompetent management?

Do I see stockholders dumping BOA stock? You betcha!

Are customers leaving Bank of America in droves? I left Bank of America several years ago with ZERO chance of ever returning.

The Bank of America employee that helped me close my account gave me secret reassurance that I was doing the right thing.

I would urge all those who have an opinion of executive compensation vote with their feet and their wallets.

Perhaps standing out in front of these companies with a placard (protesting) wouldn't be so bad either.

I don't think management pay has spiraled out of control. I think incompetent
management's pay has spiraled out of control. If CEO's were paid according to the value they were adding, some would be payed much less while others would be payed much more.