[amoorthy]

I really like this thoughtful reply. One thing to add: it's unlikely that the CEO's performance will change that much after a certain payout. S/he will likely put in the same effort beyond some compensation figure, if only because most want to succeed first and foremost for their pride.

A CEO who acts like a true owner would know this and reallocate salaries as needed to keep employees happy and motivated.

[_uhtu]

I agree, the best CEO would slash their salary when the going got rough. However, there's no system to keep them accountable to this, so it doesn't happen except in places like Japan, where there's a culture around it.