Its absurd for the highest paid employee to be paid more than 10x the lowest.
It's not like a CEO is a hundred times smarter than the people one level below. The reality is that any of the executives could do the same job. At larger companies, what the hell is the difference between managing a division of 500 people or the whole company of 2500? Once you get to numbers that big it doesn't make a difference.
Here's the difference you're wondering about: the person managing the 500 people division does what the person managing the 2500 people company tells them to do.
If the CEO is wrong with their strategy, the company loses a lot more money than the CEO's compensation. If the CEO is right, the company makes much more.
I actually don't have much of a problem if super successful CEOs are paid richly. But where is the risk/reward tradeoff? Why are they still paid so richly when they fail?
Because of the opportunity cost. How does MM's parachute compare to 1) what she could have made as a CEO at other companies with more stable businesses, or 2) by simply staying at Google and enjoying her squeaky clean reputation. What she negotiated with Yahoo is likely a result of the market forces that existed at the time of her hire, and those market forces look different today. If the deal she negotiated was fair, the delta equals her parachute amount.
It's not like a CEO is a hundred times smarter than the people one level below. The reality is that any of the executives could do the same job. At larger companies, what the hell is the difference between managing a division of 500 people or the whole company of 2500? Once you get to numbers that big it doesn't make a difference.