Human beings have a difficult time visualizing large numbers. For example: take an exorbitant amount of money, like $20 million. What does a number of that size look like in concrete, visualizable terms? A fleet of private yachts? A backyard full of gold-plated swimming pools? Or, perhaps, about half of a contentious Senate campaign?
Here's another way to think of it: $20 million ($20.7 million, to be exact) was also the average pay package for 200 of the most highly-compensated CEOs in the United States, an amount that exceeds the pay earned by the average worker by 200 to 1.
That wasn't always the case. As recently as the 1950s, the difference between the pay received by CEOs and the pay received by average workers amounted to what seems today like the somewhat quaint ratio of 20 to 1. So when -- and why -- did pay for the executives in the C-Suites begin to outpace (and outpace, and outpace) those of the people filling out the cubicles on the office floor?
Harvard historian Nancy Koehn has a hypothesis. In the 19th century, Scottish philosopher Thomas Carlysle popularized a "Great Man Theory" of history, which held that momentous events were catalyzed, shaped, and therefore wholly attributable to a very select number of influential leaders -- your Washingtons, your Napoleons, your Gandhis.
Apply this metric to the corporate world and you get, as Koehn describes it, a form of "meritocratic extremism." In this system, all the successes of a company are attributed to the man in the big corner office who, of course, is compensated accordingly.
As Koehn points out, anyone who has ever worked in an office can tell you that when a company succeeds, it's usually the product of good teamwork and not just dictatorial directives from a single guy at the top. Yet, somehow, we've moved away from this understanding of success.
"We were writing about the man in the gray suit when we were talking about corporate executives in the 20th century," Koehn says. Somewhere along the line, that changed. The man in the grey suit became a superhuman capable of leaping buildings in a single bound -- and doing it alone.
The problem is: when you compare that standard to the actual histories of successful companies, the reality just doesn't match up. "Who do we remember that stands out as some kind of Superman in a red cape of a CEO?" Koehn asks. "Very few people."
Hear more from Nancy Koehn on skyrocketing executive compensation in our full interview below.
