“I don’t think my criticism has had much impact at all,” laments Crystal. “Since I started writing all this fancy criticism around 1989, 1990, CEO pay has gone up five times or so. These companies cheerfully disregard what I say.”

Nevertheless, Crystal carries on with enormous energy, applying his credentials to a problem that some call the smoking gun of corporate governance.

For some 20 years Crystal worked as an executive compensation consultant, a profession that he now speaks of harshly. During his long career with Towers Perrin, a leading New York management consulting firm, he headed the worldwide compensation consulting practice, advising hundreds of major companies. For several years after, Crystal taught courses in executive compensation issues at the University of California at Berkeley. The San Diegan has written more than 1,000 articles on the subject for such publications as Fortune, The New York Times, The New York Post, USA Today, The Los Angeles Times, Slate, The Wall Street Journal, Vanity Fair and the London Sunday Telegraph. He’s also written six books on the subject, including “In Search of Excess: The Overcompensation of American Executives.” Whenever the subject of CEO pay packages arises in the news, Crystal is called upon to testify.
Several issues disturb Crystal, and one of them is the way executive pay is determined. “The most common way is like a real estate agent; you look for comparables. If you are selling a house you look for 10 other properties like yours (in the case of compensation, 10 other companies) and see what they got. There’s nothing wrong with that,” says Crystal, “except that executive pay has gone totally out of control. Twenty-five years ago, a CEO earned 40 to 50 times the pay of the average worker. Now they give 500 times the pay of the average worker. It defies the
precepts of economics.”

When pay for any job category rises quickly or disproportionately, explains Crystal, usually there has been a large increase in demand for those workers or a dramatic decrease in supply. That isn’t the case with CEOs, especially with the corporate merger movement that has been under way in the past 20 years that put many talented leaders on the street. Additionally, Stanford and other top business graduate schools are turning out MBAs by the boatload.

The way the pay package is structured can be unfair as well, explains Crystal. “If you have a CEO who takes tremendous risks, that person may deserve a big reward if he hits the ball out of the park. That’s the American way. Lee Iacocca took Chrysler, a company on the ropes, and said, ‘I’ll take a salary of $1 a year. I won’t have a bonus because we can’t afford it. Just give me stock options and I’ll take my chances.’ He turned it around and made about $50 million, and nobody begrudged that.”

On the other hand, most pay packages today guarantee bonuses and stock options, regardless of performance. Carly Fiorina, chairwoman of Hewlett-Packard, just announced disappointing results, but will be rewarded anyway. “Gary Wendt had a tremendous record at GE Capital,” observed Crystal. “He left that and hired on at Conseco, the big insurance company in danger of going bankrupt. The board gave him a paycheck worth $100 million even if he falls on his face. You have to look at that and say, ‘where is the risk? If I screw up I get $100 million, but if I do well I get $500 million. If hard times come, we throw workers out on the street. They’re lucky to get paid until Friday.’ Jill Barad (at Mattel) presided over a 50 percent drop in the stock price, then walked out with a severance package of $50 million.”

Even CEOs who perform well get too greedy. He cites Jack Welch at GE as a perfect example. Welch’s last annual pay package was around $75 million a year, and there are many lifetime perks on top of that. “If anyone deserves $75 million it’s Jack Welch,” observes Crystal. “But you get to the question, does anyone deserve it? Welch is only one of 340,000 employees at GE. If there is great performance, ‘it is I, Jack Welch, who gave it to you.’ If the stock plummets, blame Alan Greenspan or Bill Clinton. I say, ‘wait a minute, if you’re taking all the credit on the upside, why not a severe beating, a public shaming, as you walk out the door?’”

Because stock options and bonuses are tipped in favor of those at the top, Crystal says he opposes an across-the-board tax cut. The decision makers are giving themselves hugely disproportionate salaries to begin with. Crystal admits this is a difficult problem to solve, since CEOs have an enormous influence over their own salaries, but having a high tax on extreme salaries is one way to keep them in check. As tax rates for the wealthy have decreased in the past 20 years, salaries have soared. At one time in Denmark, if a person’s taxable income rose to $53,000, the tax rose to 105 percent. “Few people earned more than $53,000,” chuckled Crystal. “I’m not saying I favor punitive taxation. But it does work.”

What Crystal really would like is for boards of directors to exercise restraint. He thinks that professional investors are beginning to realize that when a CEO takes an egregious salary, it is not a bullish implication for the company’s stock, five or 10 years out. Crystal may find his subject a hot topic in the years ahead, especially if corporate earnings lag. During years when everyone does well economically, it’s easy to disregard CEO avarice. When earnings decline and companies begin looking for ways to cut costs, we can only hope there are plenty of mirrors in the board room and the CEO and his top executives are forced to look themselves in the eye before they launch massive layoffs.

Janet Lowe is the author of 16 books. Her latest is “Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger,” published by John Wiley & Sons.