Executive pay is clearly out of touch with executive performance.
In the past 30 years or so, while real growth has been difficult to come by in mature markets, executive performance has become short-term transactional (i.e. through the buying and selling of businesses at inflated prices). These transactions have been executed in order to bolster a company’s share price in the short term. For a long time these transactional results seemed positive, and executive pay correspondingly grew. [...]

Recently I came across this article on CEO compensation in Slate by Ray Fisman. It’s a very interesting article, and the position Fisman takes, that CEOs and compensation committees usually do not enter into undue intrigue and backhand politics, is probably accurate.
Most compensation and nomination committees do take their jobs very seriously, and try to emerge with compensation packages that make sense. But the challenge they have faced and the challenge society continues to face is that of peer comparison. [...]