What caused this ? In my view the owners of companies, that is, the shareholders have been asleep for far too long letting CEOs get far too generous pay packages so long as they meet very low performance targets. Then headhunters have an incentive to push up salaries as they get more fees when CEO pay is higher. Next corporate remuneration committees have proved pretty useless and are probably stuffed with people that are well paid and on good terms with the CEO and so long as he or she is well paid, they make sure the remuneration committee people get promoted and well paid as well.
What can we do? Well firstly make shareholders have a binding vote on remuneration and if 51% of those voting reject the package then the remuneration committee has to come up with a new package that gets a 51% approval with a minimum 10% slash of the package each time the package is voted against.Also lets make remuneration much more transparent - base pay plus a bonus in shares payable if rigorous and demanding performance targets are met and the shares cannot be cashed in for 5 to 10 years so that future poor performance that is met with lower share price penalizes the CEO and also CEO / bosses face possibly the loss of their shares if the shares fall back too much. Give workers representatives a job in the boardroom and remuneration committees and make it impossible for the CEO to get a total pay rise in any year more than 3 times the percentage of which the average employee gets. Finally, no profits for the company no bonus end of story. I am sick of seeing bank bosses getting bonuses year in year out when losses are made - like in the case of Royal; Bank of Scotland when they have made losses 9 years in a row !
Yes these measures are not perfect but the present system has been in disrepute for years.Something needs to be done to stop the rot. By the way, I am not against executives getting millions for excellent performance - look at Apple's share price it was around $13 in February 2007 and today closed above $133 a ten fold increase in 10 years. Amazing performance and both the bosses and employees deserve their millions.