Will Hutton poses the not unreasonable question, why is it necessary for a CEO to earn 190 times the average wage? Of course it's not necessary, by any conceivable economic or psychological rationality. The logic of incentives doesn't cut it here, and has been heavily undermined by work in hedonic psychology and behavioural economics showing that relative changes in income are what matters, rather than absolute levels. And unless one subscribes to a 'war for talent' ideology, it's difficult to see how this is an efficient labour market, even if orthodox economics struggles to identify the precise ways in which it isn't.
So we have to view it as political, that is, CEOs are able to exploit organisational opportunities for rent extraction. That is scarcely very surprising. But I would go further, and suggest that it also has certain metaphysical-political elements to it, in which particular anthropological claims (namely that a minority of individuals have a freakish, inexplicable talent, making them incomparable to the general mass) and economic practices (salaries of 190 times those of the general mass) are constantly propping each other up.
Both of these have to be viewed as equally foundational. If rampant salary inflation were explained purely in economic terms, there is the grave risk (from the beneficiaries perspective) that it could be falsified using economic evidence, namely that these rewards don't translate into performance, as it is well-understood that they don't. It needs, therefore, a substrate which suggests that these people are not ordinary, culturally or anthropologically, and can therefore not be measured using the yardsticks familiar to the rest of us. They are exempt from ordinary modes of evaluation and criticism, indeed their leadership status makes them the authors of new modes of evaluation and criticism. Moreover, seemingly unjustifiable levels of income are then profferred as examples of how unusual these people are. The more they are paid, the harder it is to subject them to any public measure of evaluation, because the less they appear to be normal members of society, and the more they seem like an eruption of genius or glorious violence. They don't claim to have 'earned' their money, any more than Roger Federer claims to have 'earned' his back-hand; their money is one manifest symptom of how different they are from the rest of us, and must be tended accordingly.
In my forthcoming book, I suggest that Schumpeter is the key figure here. Through his emphasis on entrepreneurship, Schumpeter implicitly offers an anthropology of difference, that is, his economic theory rests on the assumption that there are certain individuals who do not or will not operate according to the same rules as everyone else. They are exceptional and amoral, transcending the norms and standards which the rest of us allow to constrain us. They produce the institutions of capitalism, while the rest of us inhabit those institutions. It stands to reason that only a very small minority can be classified in this exotic way.
While it would be a little unfair to represent Schumpeter as a defender of the '1%', he was undoubtedly a theorist of capitalism's dependence on unruly 'talent'. I try to show that there is a latent Schmittian political philosophy underlying the Schumpeterian worldview, in which a tiny minority take decisions, and the vast majority obey rules. The leader is sovereign, because he decides; the rest are not sovereign, because they obey. End of story. Schumpeter transposes this anti-normative political philosophy into the economic realm (Corey Robin makes a parallel case for other Austrian economists transposing a Nietzschean anthropology into the economic realm. One important difference, as the very impressive New Way of the World points out, is that for figures such as Mises, everyone can be an entrepreneur of some sort, not only those in leadership positions).
This isn't to suggest that we should let CEOs get away with this. Even on Schumpeterian grounds themselves, there is plenty of good reason to accuse them of behaving fraudulently: there is nothing very disruptive or heroic about financial restructuring, stock buy-backs and imbibing managerial fads out of airport books. More importantly, critique needs to work as hard as possible to extend public measures of worth to include this minority of self-identified 'exceptions', and drag them back into the public sphere. My point is simply that we should recognise what is for them a virtuous circle, in which extreme levels of material inequality can be used to indicate their unusual existential quality (for better or worse), and that unusual existential quality is the legitimating basis for further increases in wealth and income. Hutton is entirely right to pose the question, but until the Schumpeterian-Schmittian idea of exceptional individuals is also challenged (not only in business, but in culture, sport, politics and so on) the individuals concerned will be difficult to pin down critically.