I remember something from years ago regarding tracking boardroom compensation before and after executive compensation transparency laws were brought in, that made this exact point. It also said that because it became an investment signal, the situation developed that companies could raise far more money from investors by inflating their executive compensation, compared to their competitors, than the compensation itself cost them, so it for a while it almost became dumb not to, resulting in a large part of the escalation of executive compensation in publicly traded companies.
Most investors are surprisingly low detail. They are looking for indications of confidence in comparison to competitors, as opposed to knowing a lot about the specific companies business. If company A in sector Z pays out a load of executive bonuses, or headhunts a new CEO at a higher rate than companies B, C & D, then the stock will usually rise at such news, unless there is some other very public news to cancel that out.
The low amount of thought that goes into investing tons of money blows my mind. When I was younger I assumed investors did tons and tons of homework and had all kinds of domain experts, etc., but then I too got out in the real world and saw how it really works.
I’d argue “wasting money” with higher wages for employees is more of an indicator of being comfortable in its business model and margins rather than just a few people paid millions. For example, Costco seems a lot healthier than Walmart and last I checked the stock for the latter was underperforming against Costco (although Costco is also underperforming in comparison to broader indexes because of the Amazon fears by investors).
