How Do You Judge CEO Pay as Fair or Not?

Reuters has a story today about NASDAQ's CEO Robert Greifield getting $18.4 million for 2006. Stock value fell, and yet the exchange's profits more than doubled. And recently I had an executive compensation consultant make the same point about Robert Nardelli, who was forced out as CEO of Home Depot. As people bemoaned the level of his compensation, this consultant said that Home Depot's actual financial performance improved - and others have pointed out as much. So how do you value a company? Is it the stock price? I can remember one company in the semiconductor business that steadily increased their profits quarter after quarter with little interest from investors because it was in an "unexciting" segment of the industry. But what else can happen? So long as investors expect to see the big pay-off from increased stock prices regardless of what the business fundamentals do, there will continue to be a split between how CEOs are paid and how companies perform, because too often the firms will do well from one point of view and badly from another.