A good CEO can create massive value, but the present value of any particular choice of CEO -- which should be an upper bound to the performance-independent pay they are able to negotiate -- needs to be diminished according to the uncertainty in the evaluation. That's where the leverage excuse falls apart: uncertainty is through the roof. Everybody's throwing darts at a dart board and everybody knows it, so if the story about rational value estimation and leverage were the whole truth we would not expect to see CEOs reliably paid stratospheric salaries for mediocre or failing performance, yet that's exactly what we see. We should therefore consider alternative explanations.

I’ve always wondered: if CEO pay was truly tied to their “creating value” then shouldn’t they lose money if they destroy value? If the answer is yes, then why aren’t bad CEOs losing money? If the answer is no, then why do we pretend they are paid in proportion to the value they create?

In many cases, the lion's share of C-level pay is not straight up cash, but equity. They might still make money if they destroy value, but the better they do for the company, the better they do for themselves. That's what you're looking for, right?

Better still, that stock compensation isn't really paid for by the company. The costs of paying with equity accrue to shareholders in the form of dilution.

That's why I was careful to scope my complaint to performance-independent pay.