Section FourCASE 4-2 continued
found that such performance explains only 19.8 percent of the
variance in their compensation, however, which leaves
approximately 80 percent to other factors.^7 Further, other
critics have pointed out the vast differences between the
United States and other countries in ratios of CEO
compensation to the average worker’s compensation. Reports
indicate that CEO compensation in some U.S. companies is now
200 times higher than that of rank-and-file employees whereas
others indicate that the ratio has risen as high as 475 to one.
When compared to other industrialized countries, the ratios are
much higher in the United States.^8
Because of the problem of excessive compensation,
several recommendations have been proposed. Some are very
high-level policy recommendations, which would require
legislation. One such recommendation is that the U.S. Glass-
Steagall Act of 1933, which prohibits bankers from sitting on
their customers’ boards of directors, should be amended to
permit such practices. Presumably, such bankers would be
more cost conscious. A radical policy recommendation is that
the United States should move to a German style of
codetermination system in which worker representatives sit on
boards of directors. In contrast, another recommendation is to