Cavey writes:
Exec salaries are high because they need to compensate the execs for not being free to set up their own businesses which, if successful, could make them much wealtheir than any salary.
IF successful.....
Isn't good capitalism about rewarding innovative and entrepreneurial risk taking?
Frankly - If these execs could all successfully start their own highly rewarding companies then they could contribute to the collective wealth of the nation far more effectively by doing so than by heading up the existing companies that they do. I think we should take measures to encourage them to leave these jobs and setup the sort of new companies that you are saying they would.
But it strikes me that the risk factor of taking a position in a FTSE 100 company (or equivalent) is far less than investing one's existing wealth in starting a new company.
The CEO of the multi-billion multi-national I work for spends most of his time on the golf course. He also conveniently arranges his globe trotting around various sporting events. He is in London for Wimbledon, Melbourne for the boxing day test, wherever for the champions league final and so on and so forth. No doubt he will be in Eastern Europe for the Euro football this summer and back in London well in time for the Olympics. Could he go off and have an equally comfortable and profitable life by risking his own money in his own startup company? I very much doubt it.
What we seem to have in place at the moment is privatised profit and socialised risk.