[randyrand]

That depends. Do you mean free market capitalism or crony capitalism?

To decide whether this is what free market capitalism intends, we'd have to determine if their wages are large due to free market forces (e.g supply and demand, etc) or if there is some government collusion going on inflating their wages.

[itaris]

What sort of collusion would increase their wages?

[addicted]

CEOs pick board members, and board members decide their salaries. Further, board members tend to be other CEOs so it's in all of their interests to inflate CEO salary.

That would be the collusion, although I think it's less collusion, and more a misalignment of interests that lead to a negative outcome.

[valuearb]

Because of the hysteria over "raiders" public companies have been able to prohibit shareholders from electing their own board slates, which has led to boards packed with insiders who collude to raise their and the CEO's compensation.

[randyrand]

lobbying/bribing for laws intended to limit competition is the most common weapon of choice.

[itaris]

But that wouldn't affect the ratio of employee wage to executive wage. Lobbying/bribing would increase the company's total profit.

[randyrand]

Executives are often paid (or given raises) in-part or in-whole relative to the companies total profit.

Typical employees are not.

[itaris]

Exactly, capitalism working as intended.

[zo1]

You say that as if it's a bad thing. A company is not a communist-commune where everyone owns the "commune" collectively. The executives' compensation is based on the company performance because they probably own shares and because their specific "function" is to make the company perform better.

An employee's function, on the other hand, is to do their "task". They get paid to do it. Now, you could argue that if they do their task well, then the company does well as well, but that's not the way the relationship is presented. It's more transactional in nature, because it's easy to quantify the value being exchanged.

[bluntfang]

there's not a difference.

[randyrand]

There is actually a pretty clear distinction. Here is one persons explanation if you want to inform yourself.

http://www.thedailybell.com/editorials/richard-ebeling-free-...