I saw this story on the government looking to regulate executive pay (actually a crawler of the news on Fox as we were leaving lunch the other day) and felt like one of those movie heroes as the bomb is about to go off. Everything goes into sloooooow-moootion, and the hero hollers "Noooooooo!" in a deep voice, since everyone sounds like Barry White in slow-mo, as he either starts to run in vain towards the blast or dive out of the way just in the nick of time.
The one thing that could make sense in the proposal is to have stockholders vote on corporate pay raises; the non-binding votes that are in the proposal have very little teeth other than to possibly show up sloppy boards of directors.
What might make more sense would be to have binding votes on top executive's pay. Corporate boards have a tendency to become a bunch of yes-men (have the board meeting in Mexico and they become a Si Section;-) and rubber stamp pay raises; making shareholders approve them would be a step in the right direction. If you coupled that with Internet voting of shares rather than giving proxies to whatever faction (usually the board's) will be at the meeting that you support, that would make the corporate accountability even better.
Most shareholders don't care about the details of their company's board as long as the company seems to be doing well and the path of least resistance is to give management your proxy if they seem to be doing well. If pay raises required an active majority of shareholders to mail-in or click-in saying "Yes, that pay raise is fine by me.," we'd get more reasonable pay package.
However, trying to conjure up a government-mandated formula for how much CEOs make seems counter-productive. One of my general thoughts on government in the marketplace is that it is a good referee (judicial system), a mediocre coach (regulation, industrial policy) and a lousy player (government-owned businesses).
Good decision making is worth money. If billions are riding on a decision, it may well be worth tens of millions to have a good decision-maker. Yes, that means he'll make a gazillion times more than Joe Shoprat, but more is riding on the CEO's decision whether to launch a new product that Joe's decision to pull a defective item off the line. Both are important, but Joe's decision isn't going to make as big of a dent on the bottom line.
What often the problem is with executive pay is that mediocre decision making is getting overpaid. However, that's better left to stockholders than to Uncle Sam, and Uncle Sam is best left out of the loop, with the possible exception of making it a bit easier to keep mediocre CEOs accountable to their shareholders.