How did we collectively let it come about that a small group of powerful men, corporate senior executives, is allowed to set its own pay scales? These people decide among themselves how much they should be paid, and (subject to the vagaries of the tax code) how the pay should be structured (cash, stock, options, etc.).
It shouldn't surprise us that they've quietly agreed, over the last few decades, to wring every drop of blood they could out of the turnip. If the corporations they run had done this, for the prices of the goods and services they sell, it would be an antitrust violation; but somehow it's OK if the executives are all on each other's boards (they are) and they all agree on what each other should be paid (they do).
Nobody else in this world is allowed to determine unilaterally how much money he makes. Not you, not I, not the President of the United States. Congress comes close, in that they can vote themselves a raise; but they're restrained by outrage among their constituents which could prevent them from being reelected. Only corporate executives (and mainly American corporate executives, although the practice is starting to spread to Europe) can decide, the value of my job is, oh, $750,000 a year base, but it also deserves annual bonuses of (say) $15 million dollars.
Nobody is "worth" that much money, not even if he (it almost always is he) can spin gold from straw, like Rapunzel. The practice is sheer, unadulterated greed. In the middle ages, these men would have been vilified as mortal sinners for their greed. Now they are "the masters of the universe." Which is right?
So I'm not weeping that the Treasury Department is cracking down on senior executive pay at the banks that have taken TARP money. Believe me, you'll never see any of these men standing on a street corner with a cardboard sign reading, "Hungry, please help."