Apply the argument to any non-executive in the same company. Oh, I hear the roars of protest already! "We can't compare non-executive salaries to executive salaries, the percentage of revenues isn't the same!" However in any other context, the "percentage of revenues" argument isn't used. At all. Ever. So why is it relevant when discussing executive salaries? Answer: It isn't relevant. Next question!
Good job shooting down the straw man argument you proposed. Why would calculating the ROI of an employee be restricted to only executives? An employer should be considering the ROI when hiring any employee, from a fast food cashier to a CEO. I am only a senior level software developer / technical architect, but my pay is still closely tied to the ROI I can provide compared to my employer's other options. During initial salary negotiations my current employer tried reducing my requested salary by mentioning they had another candidate who was asking for $30k less. I was being hired to improve their CRM system, and my primary argument was their salespersons' opportunity close rate would be significantly impacted by whoever they hire. $30k was a negligible amount, so they should make their decision on who they feel will do a better job. Considering my very significant merit raise and bonus after my first year, they likely felt they made the right choice.
No, what is relevant is the issue of Value Added. Is the executive Value Add, worth the sums we pay them? And I say it isn't. No one has ever made a cogent argument, based upon inarguable facts, that paying the CEO $1 million versus $23 million, results in better performance. Let alone 23x better performance.
First off, you don't have to provide 23x better performance to be worth 23x as much. You just need to be add more value than you are paid. Those are wildly different targets.
Second, I will agree that I have never seen a good study showing if highly paid CEOs do better or worse than lower paid CEOs. There are some studies that only track company performance and compare it to CEO pay, but that ignores the possibility that companies in crisis would pay CEOs even more to correct their problems or join a company where their job is to manage losses instead of creating gains.
One more thing. When we as shareholders continue to pay millions of dollars in compensation to executives, and the company performance is flat to negative, what kind of messages are we sending there?
Shareholders are sending the message that they cannot do any better themselves, or they would put their money somewhere else.
Put it into pure, hard-nosed economic terms. Imagine someone offered to sell you office paper for $1000/ream, and told you that you had to do it to remain "competitive", and that you needed the "right kind of paper" because you "just don't get the same quality of document" unless all your correspondence was printed on "hand-crafted, 100% organic, all cotton, artisanal blend from disadvantaged youth in Bolivia". What would any sane person say in response to that? They'd say it might be a nice notion but seriously, bugger off. It isn't affordable, it isn't practical, and the economic value added just isn't there.
If you think the quality of paper a company uses is as significant to a company's success as the quality of their workers, there isn't much point to discussing this with you. I'm assuming that is not what you meant to say, but it is all your analogy is implying. Although just to be clear, I agree that paper is not important enough to a company's success to ever be worth 100x the price of standard paper. I simply disagree that this is analogous to the value more qualified employees can bring to a company.