EXECUTIVE BARGAINING
American CEO pay has risen exponentially since the 1980s as labor union power has declined. The key reason is executive compensation committees are detached and thereby raise CEO pay as if they were spending other people's money.
Executive bargaining is a solution to the above problem in which employees from across the company directly negotiate executive compensation with the CEO. Employees have information of the inner functioning of the company and motivation to negotiate for efficient executive compensation as alternative beneficiaries of these resources. By keeping executives accountable to employees, this process could also improve company culture and morale.
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Companies decide non-executive wages by confronting the limitations of resources described in the budget.
In contrast, pay for top executives is decided by independent directors with no stakes in the company and little consideration of the budget.
As the alternative beneficiaries of excessive CEO pay, employees should use their knowledge of company resources to negotiate executive compensation.
Companies decide non-executive wages by confronting the limitations of resources described in the budget.