It is if you're in high demand. LeBron James, for instance, earns $19MM per year and generates far more than that in revenues for the Miami Heat and NBA.
The NBA imposes a salary cap because the owners don't want to pay the market rate for their star players. It does not mean those stars aren't worth the higher salary in the money they generate for the team. It is an artificial limit that does not correspond to value.
That's not entirely true. The salary cap is because if teams paid the fair market value, the teams with a larger budget would be able to run away with it like the Yankees did in baseball (with over twice as many World Series titles as the next best). It keeps the league artificially competitive.
Keeping the business world artificially competitive is an interesting idea, and not as bad as I initially thought.
Technically, in baseball, the lower market teams get paid out of the luxury tax. Sometimes those payments exceed their team salary. The competitive argument sounds nice, but is more for the owners than competitiveness.
"Keeping the business world artificially competitive is an interesting idea, and not as bad as I initially thought."
I have no understanding of why it is a good idea or how, given CEO's and businesses are not teams competing for a trophy how it is even relatable.
They are teams competing for trophies, though; the trophy is your money/market share.
But beyond that, artificial competition could be a good thing. The large companies have a lot of advantages over the smaller companies, like economies of scale and name recognition, but they also have an incentive to stifle innovation (either directly or indirectly through the Innovator's Dilemma) and erect barriers to entry. Allowing smaller companies to "steal" CEOs helps offset some of those advantages. Even if they aren't well suited to that role, the name recognition alone can be an advantage (just look at SolarCity).
But I keep going back and forth on this. Set the salary cap too high, and the small companies can't steal the CEO away. Too low and it doesn't properly reward them for the difficulties of managing 200k+ person companies. A proper middle ground, if it exists, would be hard to find and need constant adjustments.
The only ones would could regulate CEO salaries in this manner is government and given the job they do with taxi cab medallions, I do not believe they are competent to do anything but screw it up.
Technically Lebron personally makes over 10% of the revenue of the Miami Heat (in 2014, 188M) [3]. There are 68 Heat employees [2] not counting the other players, and definitely not counting the arena workers. During the 2011 lockout, after they signed Lebron, Wade and Bosh, the Heat cut staff salaries by 25%.[1] Of course, not everyone's salaries were cut... like the people with lucrative contracts.
The word 'Reasonable' means "appropriate, fair, moderate, of sound judgment, and sensible". To me, cutting people's salaries so they have to go find second or third jobs, and giving someone who isn't even working over 10% of the revenue of your company, is not reasonable.
By artificially inflating the salaries of players you create multiple problems.[4] Teams with wealthier owners can buy up all the best players and trounce all the other teams. Costs for the teams skyrocket, requiring that salaries then be cut to be able to pay the players more, and requiring more complex ways of making enough money to pay the players. It puts an unfair advantage on the players in terms of determining how the company deals with them. And it creates a disproportionate leverage that de-emphasizes the game, and focuses more on the pain threshold of the market that's paying them. It affects the entire national economy as cities are affected by the touring of the games, building of stadiums, etc.
I don't think anybody's salary should be directly proportionate to the amount of money they make for an employer. While it's one of the favorite tenets of people like Gordon Gekko, it doesn't make for a fair, sensible, or moderate decision, whether you're thinking about the fate of the company, the welfare of the majority of the employees who work for it, or the economy it serves.
You are forgetting how many butts a player like Lebron puts in seats, not to mention how much merchandise he moves. He adds far more than the 10% of team revenue he takes.
