It is usually some combination of consultants using bogus logic, and other executives trying to bump their own pay by hiring very expensive colleagues.
I have never been convinced it is worth paying these kind of numbers. I have looked at all kinds of businesses, I have looked at businesses where productivity is power-law distributed (i.e. one good employee can be worth 10,000+ bad ones) and it never adds up...again, even if you look at situations where productivity is very unequal (which it isn't in almost every business, and very much isn't at Amazon)...it doesn't work.
One particularly toxic part of Amazon is that they pride themselves on only hiring the "elite". Well, if your market cap is hundreds of billions and you hire tens of thousands people a year...you aren't hiring the "elite" (genuinely, there are only three or four CEOs over the past five decades who are truly proven execs). So you have this awful culture where everyone views themselves as this unbelievably valuable "alpha dog". Inevitably, this results in them lighting huge stacks of other people's cash on fire (the real danger isn't hiring the 80 IQ guy, it is the guy with a 110 IQ who thinks he is a 160 IQ guy).
The majority of AMZN's tech employees (ie. average SDE) know they are not elite and often talk about how they consider themselves failures for not being getting into better paying companies.
I didn't say either that employees are elite or that they think themselves to be elite. I said that is the hiring culture, which is something quite different.
There are consultancies that specialize in compensation benchmarking. One is Radford Consulting. They survey companies for pay info. Imagine they also get intel from clients.
I have never been convinced it is worth paying these kind of numbers. I have looked at all kinds of businesses, I have looked at businesses where productivity is power-law distributed (i.e. one good employee can be worth 10,000+ bad ones) and it never adds up...again, even if you look at situations where productivity is very unequal (which it isn't in almost every business, and very much isn't at Amazon)...it doesn't work.
One particularly toxic part of Amazon is that they pride themselves on only hiring the "elite". Well, if your market cap is hundreds of billions and you hire tens of thousands people a year...you aren't hiring the "elite" (genuinely, there are only three or four CEOs over the past five decades who are truly proven execs). So you have this awful culture where everyone views themselves as this unbelievably valuable "alpha dog". Inevitably, this results in them lighting huge stacks of other people's cash on fire (the real danger isn't hiring the 80 IQ guy, it is the guy with a 110 IQ who thinks he is a 160 IQ guy).