ered Do unto others, as you would have them do unto you. It is not uncommon for members of the board of directors to be personal friends of the CEO. The board will select three or four of its members and appoint them to the compensation committee. The committee is composed of members who are usually white, male and almost always fellow corporate officers from other companies. These members will seldom pay the CEO anything less than what they themselves make; they dont want to insult him. The committee tends to set the CEOs salary at the high end of the comparative pay scale (what other CEOs from competitive firms make) and then attach a premium to cover what competitors might pay to hire away their prized executives. One benefit companies derive from higher CEO salaries is that; current tax codes allow a company to deduct a reasonable allowance for salaries or other compensation. The code defines reasonable as 1 million dollars, which is more than 99% of the American workforce earns in one year. Companies have therefore been able to deduct salaries that are vastly disproportionate to those of their lowest paid employees.Companies dont have to pay outrageous CEO salaries. There isnt a shortage of acceptable capable executives in the United States. Corporations abroad do not seem to encounter problems with motivating their CEOs with normal compensation packages. According to international human resources company Towers Perrin, the average CEO in the U.K. makes $645,540, in Japan $420,855 and in Germany $398,430. When Germanys Daimler-Benz acquired the smaller American car manufacturer, Chrysler, Chrysler CEO Robert Eaton earned eight times what Daimler- Benz CEO Juergen Schrempp earned. In order to effectively reign in run-away CEO salaries we must exert control from every angle. Salary tax breaks should be limited to thirty times the salary of the lowest paid employee. The fraternal relationship between the CEO and those who make decisio...
