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It's easy to demonize the executive who makes millions. It doesn't seem fair when compared with an employee who earns 20 to 50 thousand. Politician, union bosses, and social activists use the comparison to show what they call "A disparity in compensation." It's good rhetoric. However, it fails to reflect the real world.'

It a Capitalist, free enterprise system, everyone is paid based on the value of their contribution. The value of a mail room clerk is less than a salesman or product developer. If a CEO's running the company increases its value to his stockholders, he should be compensated accordingly.

Say during a period of time the value of an enterprise increases by several billion dollars because of decisions made by its CEO. That executive's contribution to the growth of the companies value is worth his compensation of several hundred million dollars. That decision is up to the company's board of directors.

Unfortunately even poorly preforming CEO's receive fat compensation packages or golden parachutes' when they are fired or leave. When they were recruited by the companies board of directors, they negotiated their terms of employment. If the directors make bad decisions in choosing or compensation, they are answerable to the stockholders. If the Board of Directors makes bad decisions, the company's owners, the stockholders, can vote them out of office, or worse they could face a hostile takeover.

Business is a dog eat dog' world. Sharks are circling, looking for a poorly run company they can takeover, improve and then sell for a profit. Besides keeping their stockholders happy, directors have to watch out for the sharks. If they preform poorly, they may be the next meal.

As long as they do not violate law, the actions of a privately owned company are none of the government's business. Companies' rise or fall based on those decisions.

Learn more about this author, James E. Fish.
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