CEOs of the world unite!

Lately, America's Chief Executive Officers (CEOs) have adopted a form of socialism to defend their soaring pay packets -

"From each according to his ability; to each according to Towers Perrin!"

In 1980, your typical Chief Executive Officer (CEO) of an S&P 500 company earned an average of 42x the pay of their workers. In 2004, this multiple had jumped to an astonishing 431x.

In 1940, George Orwell suggested that the boss should take home no more than ten times that of his workers. This may seem a little low today but it is hard to argue that a multiple of 431x sounds right.

There are many organisations dedicated to bringing down the pay of the corporate "fat cats" but in the past. these have tended to come from the politics of envy, from the Unions (see above), from those committed to destroy the system, and from environmentalists.

This is why, this organisation is so interesting.

The Investors for Director Accountability Foundation comprises successful businesspeople such as Fred Rowe and T Boone Pickens. They would be as welcome at an anti-globalisation march as a pin-striped City broker. In their mission statement, they declare that "We are investors and capitalists. We prize the driven, egocentric, imperial CEO who builds shareholder value" and add, somewhat cheekily, that "We don't sell our stocks because a company damages a tree in Bolivia".

However, they too are concerned at the soaring pay difference and the effect it is having on the returns of shareholders (often pensioners). They have singled out Pfizer as the most egregious example, reports the Wall Street Journal (subscription only).

CEO Hank McKinnell has served as Pfizer’s CEO for the past five years. During this time, Pfizer have paid him $79mm, guaranteed him a neat $6.5mm annual pension and watched the stock price decline by 44%.

Defenders of the status quo will shrug their shoulders and point to market forces. But this is just not accurate. Companies will happily pay megabucks to secure the services of a super-star CEO, but you would hardly expect a fierce bidding war to erupt were the services of Mr. McKinnell to become available.

Despite Enron and despite Worldcom, America's Boardrooms remain a cosy club where 'other people's money' is spent freely amongst themselves.

This group was set up to defend the interests of the small shareholder. But there is far more pernicious impact of the inexorable rise of CEO pay. For a system to survive, it does not need to be popular, but it must not be despised. Socialism died because those exposed to it could see the dire effects it produced. Capitalism is not yet hated, but CEO pay is a propoganda gift that the anti-globalisation Luddites can only dream of.