Some analysts say that the main reason why the CEO makes more money than the rest is because of the nature of the job. They have more at stake. More responsibility, more risk, more to lose than other employees. In fact, many CEOs are asked to take major positions in the companies they run in order to provide an incentive for them to create value for their shareholders.

Another reason – pointed out in the late 90s, was the advent of profit-sharing options that increased executive compensation on paper, while most of that wealth was unrealised in options that were not exercised.

In a related issue, the US Congress has been questioning the likes of Goldman Saachs – the premiere brokerage firm and investment bank – the oldest firm on Wall Street. They have accused Goldman Sachs of making money off of investments, while their own accountholders lost money.

In technical language, this is known as hedging your loss. When a company exposes themselves to risk, they try and minimise the risk of losing money by creating opposite positions or countermeasures to insure that – if they lose, the will have some way to keep afloat or survive. These are known as short-sales. These are open positions that bet that the market will go down and therefore they give you the right to sell at the established price, regardless of market conditions.

Goldman is accused of taking up positions that were contrary to the ones they were promoting among their clients. Unethical? Against the rules?

Another matter to think about is the role of investment banks as “market makers.” This means that if a client wants to sell something, they will look for a buyer. If a client requires money, they will find someone to lend them money. Short-selling is a perfect instrument to create a market for potential demand. It is an effective instrument to keep markets in check and values in proportion.

The US government is waging a war against both CEOs that earn hefty salaries and companies that make large amounts of money while an economy sinks. Is this the right approach to policy-making?