people in a position to set their own salaries have a natural incentive to treat themselves generously

John Cassidy:

His research shows that “supermanagers,” rather than “superstars,” account for up to seventy per cent of the top 0.1 per cent of the income distribution… Rising income inequality is largely a corporate phenomenon. Defenders of big pay packages like to claim that senior managers earn their vast salaries by boosting their firm’s profits and stock prices. But Piketty points out how hard it is to measure the contribution (the “marginal productivity”) of any one individual in a large corporation. The compensation of top managers is typically set by committees comprising other senior executives who earn comparable amounts. “It is only reasonable to assume that people in a position to set their own salaries have a natural incentive to treat themselves generously, or at the very least to be rather optimistic in gauging their marginal productivity,”…

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