The only place in the world where executives can underperform and still expect $20 million annual salaries

A Wall Street Journal writer challenges the unquestioned logic of corporate America:

David Yermack, a professor at NYU's Stern School of Business and an expert in executive compensation and performance, says there's little evidence that higher compensation leads to higher performance, and consequently better returns for investors. Mr. Yermack calls the compensation-performance link the "holy grail" of academic research in this area, but says it's "an important result that has never actually been found" ....

Think of the big banks, at least through 2007. Kingly pay packages for executives hardly benefited stockholders, and encouraged managers to take short-term risks.

Anyone who fears these new rules [to limit executive pay at large firms] might turn our economy into somewhere like social democratic Denmark or Sweden, where executives typically earn modest salaries, ought to have a look at those markets sometime. As executive pay in America has soared to unparalleled heights in the last decade, US investors lost about 2% a year, according to MSCI Barra. Investors in the Swedish stock market over the same period made about 4% a year in dollar terms (NB: Some of those gains can be partly attributed to currency swings). And investors in Denmark: nearly 9% a year.

Americans may not realize it, but ours is the only country in the world where executives routinely expect $20 million a year in salary. And our markets have under-performed most of the rest of the world for years.