Thomas Piketty, a French economist, analysed the widening inequality of global incomes in his book ‘Capital in the Twenty-First Century’ (2014). Looking at US data, he found a rapid increase in inequality from the 1980s and by 2000, the top decile of the income hierarchy was accounting for 45-50 per cent of the national income.

One of the components of this distortion, he finds, is the wide gap in the pay of the top managers of large firms from the rest of the population. He attributes this to the power of these managers to set their own pay.

The astronomical pay of the leaders of US corporations is not only wide-off from the rest of the US population but also from that of top managers in other countries. And apart from showing up in inequality statistics, it disrupts global corporations. Most countries, by law, require corporations to declare what they pay their leadership and this has brought trouble to Nissan.

Carlos Ghosn, Chairman of Nissan, Mitsubishi and Renault, was first accused last month in a Japanese court of under-reporting his compensation. Not only that, recent charges against him have extended to shifting losses on his private investments to the company, making the company buy properties in Lebanon and Brazil for his personal use, and concealing that. Ghosn is credited with stitching together this global enterprise, the world’s largest producer of vehicles. After rescuing ailing Nissan (Japan) from failure by arranging for Renault (France) to bail it out in 1999, he also brought Mitsubishi (Japan) into the fold. Renault now holds 43 per cent of Nissan which in turn holds 15 per cent of Renault.

In 2009, his compensation in Nissan was reportedly more than twice what nine other top executives together make. In the most recent year, it is reported that his pay was about $22 million (about ₹165 crore) of which only about ₹53 crore would be shown and the rest deferred. His deferred compensation amount has been piling up and apparently not reported.

It is not uncommon for top managers to have part of the compensation deferred, but usually for performance reasons. In Ghosn’s case, the motivation for him to conceal apparently was his desire to be paid by US standards but not attract too much attention in Japan where companies pay their leadership much less.

Another global alliance that came unhinged also had salary differences as one of the problems. In 1998, Daimler Benz (Germany) merged with Chrysler (US), a move widely welcomed by the markets. But the companies separated in 2009, with culture clashes including values, decision making style and compensation contributing to the disaffection. Reportedly, senior German managers were not happy to see their counterparts in the US being paid more than twice what they were receiving.

The US may claim that its major corporations require to pay top salaries to attract top talent. That argument is usually swallowed when all is going well. At the first sign of trouble, glaring compensation levels draw everyone’s attention. At GE, many wonder if the rarefied compensation of its past top leaders was deserved considering the strategic mistakes they made.

The writer is a professor at Suffolk University, Boston