"This is not a real market because failure, or lack of risk of...

"This is not a real market because failure, or lack of risk of failure, is not priced into executive salaries.

It should never be forgotten – although it often seems systemically overlooked – that executives are not the owners.

The owners of the company are the shareholders. The board of directors, on behalf of the shareholders, appoints the executives and decides the salaries.

This is the theory, but sadly the reality is the executives behave like the owners and the directors too often act in the interests of the executives rather than the owners, the shareholders.

Source: http://www.smh.com.au/business/executive-pay-the-high-cost-of-market-failure-20111010-1lh2o.html#ixzz1aMF67k6B