Don Pittis, senior producer of CBC News Business. If John Thain had not been allowed to spend $1.2 million U.S. fixing up his office, including $1,500 for a wastepaper basket, would he have still have done as good a job? Considering he ran Merrill Lynch into the ground during his watch as CEO, it is hard to see how he could have done any worse.

This is a man whose pay and benefits in 2007 totalled something over $80 million.

The collapse of the Wall Street banks has poked an enormous hole in the idea of merit pay and perquisites. And into that hole has stepped U.S. President Barack Obama, who has announced a salary cap of a meagre half-million dollars for running a company that accepts taxpayer cash.

There have been howls of outrage. "No one goes to Wall Street to save the world," one well-paid analyst told the Bloomberg business news service.

And there is a certain justice in merit pay. If you are working hard while a colleague two desks away sits doodling and staring out the window, it feels right that you should be paid more.

As we have seen very clearly during the past year, profit can fall and bosses still get big pay and bonuses. The relationship between the bottom line and executive pay is not always obvious.

This is the logic of piece-work, commission sales and Wall Street traders. It is the logic of "eat what you kill," where people are paid a share of what they earn.

There's a similar logic behind the high salaries in professional sports and Tinseltown. There, the difference in merit pay is even more pronounced. The Wayne Gretzkys and Nicole Kidmans, who singlehandedly win games and bring in the fans, pull down disproportionate salaries. The people who own the teams and make the movies bid up the price of the biggest stars because their names guarantee success. This system is sometimes called "winner take all," where the top few rungs get huge salaries and everyone else considers themselves lucky to be working.

Top executives like that model. They often see themselves as the superstars of the financial world. But as we have seen very clearly during the past year, profit can fall and bosses still get big pay and bonuses. The relationship between the bottom line and executive pay is not always obvious.

Quantifying productivity

This is a problem well known outside the management suite. Making a large organization work well is a team effort, and knowing which employees make a company successful is far from a science.

Maybe that person two desks away who is staring out the window is thinking of a way to cut costs that will flow through the company and make it a sector leader. Maybe the hard work you are doing, bashing out a 10th memo, is just creating unnecessary electronic paperwork that others will have to spend time and effort sorting through without contributing anything to profits or success.

Everyone's been in an office where it's the ill-paid clerk that makes everything run smoothly. Everyone has had an exceptional teacher, paid no more than other teachers, who inspired you to greater heights. There are many examples of the person passed over for promotion who goes on to stunning success elsewhere.

Measuring the relative productivity of employees in a large organization is not an easy task. If it were easy, companies could reliably strike it rich by keeping the most productive people, weeding out the rest. Instead, when companies downsize they usually do it randomly.

In fact, I have seen cases where employers get rid of the most expensive workers first, on the grounds that it will make the company cheaper to run.

The idea, perpetuated by those of us who are already established in the hierarchy, is that experience and wisdom are worth extra pay. But that may be a self-serving argument. I fear that if half the top-paid bosses in your organization were killed in a bus plunge on the way home from the company picnic, the disruption to business would be minor.

The highly paid like to think they have a lock on the skill set that makes a company successful. That model is suspect. In most organizations there is a flood of talented young understudies quivering backstage, waiting for the lead actors to fall into the orchestra pit and literally break a leg. Fiat's big turn-around in 2007 by its Canadian chief, Sergio Marchionne, was based on firing the highly paid and experienced bosses and putting relative youngsters in charge.

So if it is not pure merit that makes executive salaries high, then what is it?

Question of corporate culture

I was covering business for the BBC when British Gas was transformed from a government corporation to a private company. One of the first things that happened was that the top brass got a huge raise. Now that they were private sector titans, they deserved private sector pay. They were the same people, doing the same jobs. Their merit had not changed. But it was a cultural tradition that the heads of private companies the size of British Gas got a certain level of pay.

More evidence of culture in the setting of executive pay is comparison with Japan. In the world's second largest economy after the U.S., Japanese executives in general are traditionally paid a smaller share of the company's income compared with what their North American counterparts receive. They are just as good as American executives, probably better, but by tradition they just aren't paid as much.

On the rare occasions when we see what goes on inside a boardroom, such as in the trial of Conrad Black, it becomes apparent that board members are in the thrall of executives. And when the boss says "I am a great man and I deserve more money", there is an awful tendency for everyone to shout "Aye."

Even the "eat what you kill" ethic of Wall Street is suspect. Einstein did not get a cut of all the value his insight created. Neither did James Watt, nor Watson and Crick. And yet creating a short-term bubble in obscure securities allows you to live like a prince. That sounds, as they say, like a structural problem.

The strongest economic argument for high executive salaries is, like many of the most interesting economic arguments, one of poor information. Since no one can be sure what characteristics will make a true executive superstar, nor for that matter, which high school student would make a great bond trader, companies that want one have to bid up the price of those who have already proven themselves. It is a question of supply and demand, where the market sets the price.

But as we have seen in houses and stocks, as clever as they are in setting prices, markets have a way of overshooting. Perhaps the executive pay market is also due for a correction.

Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC. He is currently senior producer of CBC News Business.