Exhibit 4: Median CEO pay. Montier reckons basing CEO pay on increasing "shareholder value", as measured by the share price, did wonders for CEOs as their remuneration went through the roof, but it resulted in decisions designed to lift the share price in the short term and disadvantage the corporation in the longer time. For quick examples: Exhibit 11 for the prosecution is the graph showing inferior levels of investment by public companies compared with private companies. Less investment helps the share price in the short term, but not in the longer term; Exhibit 14 demonstrates how poorly-timed the average American share buy-back has been – an indicator of a market ready for a correction, but, again, it boosts the short-term share price. The money shot for Montier (Exhibit 3 graph) is that in what he calls the "Age of Managerialism" from 1940 to 1990, underlying performance was pretty much the same as total return, but underlying performance fell away under shareholder value management as valuations were boosted without improving the real business. That can be quibbled with, but what can't be argued is the enormous boost the "shareholder value" thing provided to CEOs, as shown by graph Exhibit 4, and how that CEOs' remuneration departed from any relationship with the world of ordinary workers – graph Exhibit 16, the CEO-to-worker compensation ratio.

Exhibit 3: Returns by era. The Montier paper is based on US figures, but the local governance industry/CEO remuneration consultants have been quick to fall in line – it varies only by degree, not direction. The Economist magazine's Buttonwood column summarised the paper: neatly Exhibit 14: Buybacks are not well timed. "So shareholder returns haven't gone up in the era of "shareholder value". CEO pay has, though. Hard to believe but CEOs got by in the 1970s on $1m or so; their total remuneration has grown eightfold in real terms since then. The focus on the share price has led to an unhealthy concentration on meeting the short term earnings per share target; surveys have shown that executives will reject a project with a positive rate of return if it damages the ability to meet the next quarter's eps. Money has been returned to shareholders (in the form of buy-backs) while business investment has declined; as a proportion of GDP, it is still lower than at any time in the 1947-2007 period.

"CEOs can be forgiven for pursuing a "get rich quick" strategy; since the 1970s, the average tenure of a CEO has fallen from almost 12 years to six. Why would they care about long-term value? And while buy-backs may return money to those shareholders who take advantage of them, they may damage long-term investors; the peak for buy-backs was in early 2008, just when the market was about to crash. As Warren Buffett has said, this was the equivalent of buying dollar bills for $1.10. Exhibit 11: Private firms versus public firms investment rates "So the whole concept should really be renamed "CEO value"; they have been the main beneficiaries. And all this has led to growing inequality; two-thirds of those in the top 0.1 per cent of earners have been executives or those working in finance." This is damning stuff. Hot stuff. The stuff of revolutions – if it wasn't buried in the business pages and required many a well-meaning but befuddled board to admit they had dismally failed. Boards, being made up of people often just a little out of their depth and prey to the whims of fashion, don't like doing that. So I wondered what one of the few CEOs who might have actually been worth his money and had sat on the other side of the table as a chairman and non-executive director thought of it.

One of the things that distinguished Paul Anderson, aside from revolutionising BHP and then effectively rescuing Duke Energy, is that he's the only CEO I've interviewed who readily agreed that he had been paid too much. His response to the Buttonwood and GMO paper was characteristically honest and insightful. "As in all things, it's not that simple," he said. "The era of the long-term manager led to a lot of complacency and managing for the benefit of the CEO as well. The idea of tying CEO remuneration to shareholder value shakes up that model, but it has gone way too far. "I never worried about the quantum of what I was paid, though I took comfort that it was aligned with shareholder value and as long as I drove the company to a higher value I was not hurting myself. Like most CEOs, I was driven primarily by a need to succeed and a fear of failure -compensation was the last thing on my mind. "A stockholder once asked if I would work any less if I was paid a million dollars less. I simply answered 'no', but in the back of my mind I was thinking that I couldn't even tell him within a million dollars what I did make. "I believe the big driver in CEO pay has been the constant public comparisons. CEOs want to feel that they are appropriately recognised and rewarded within their universe. I don't care what I make, but it irritates me if I make less than a bunch of idiots running half-assed companies. Also, compensation committees don't want a policy that says we pay in the bottom quartile and hope to get top quartile performance.

"This is one of the reasons I took no salary at all when I went to Duke. The package of stock and options that I had was impossible to compare to other packages, so I was just a footnote on all the comparison charts. "If I could set the rules, I would pay CEOs half in cash and half in stock. They would have to hold the stock for a minimum of three years, but they could borrow against it. I would not allow stock options unless it were a program that applied equally to all employees. Options are considered to be free by most compensation committees and they supercharge risk taking." And the world has seen where supercharged risk taking ends up. And, no, you don't get honesty like that from many CEOs, let alone from remuneration committee chairs. Paul Anderson knows a great deal more about it than me or the rest of the commentariat combined, but after a few decades of observing the game as an outsider, I'd add another possibility: the inevitable nature of CEO pay escalation thanks to boards wanting "their" CEO to be better – and therefore must be better paid – because it means the board members themselves are better than their peers. The ridiculous nature of the comparison tables that Anderson alludes to ensures a board that seeks top performance will expect to pay a top packet pay – and the board down the road is thinking the same thing, ensuring escalation.

Throw in remuneration consultants and head hunters and it's a wonder there's anything left at all to pay the workers. It's also worth considering another Anderson admission: there are indeed idiots running companies, employed by boards equally foolish and often unwilling to admit their mistakes. Making it to the CEO's office doesn't necessarily mean great talent or wisdom. Sometimes it's pure luck, being in the right place at the right time with a series of fortunate binary decisions on the way there. Sometimes it's a talent for corporate politics and knowing how to smooge the board. Sometimes it's just the Peter Principle at work. But whatever it is, the board will want to pay him or her wonderfully well. Michael Pascoe is a BusinessDay contributing editor.