Reading the sports section, I'm marveling at how the Oakland Athletics have managed to stay in contention year after year in spite of a low payroll and the fact that every future star that they develop ends up leaving for a bigger contract with a competitor.

And then it dawned on me: when was the last time you saw a CEO at a major company leave for a higher-paying job somewhere else? I can remember talk that Meg Whitman might leave eBay (NASDAQ: EBAY) for Disney (NYSE: DIS) but musical chairs never seems to happen among 8-figure CEOs.

This absence of competition and free agency, I believe, helps expose what a joke executive compensation is. The only reason to pay a CEO $50 million is to prevent him from going elsewhere for more money, right? I mean, if the most he could make at at another company is $15 million, then why would he turn down an offer of $25 million? The fact that CEOs at top companies never go somewhere else for more money makes me think a lot of compensation committees are leaving a lot of money on the table. If you're the CEO of a billion dollar company, you pretty much stay there until you retire to spend more time with your family after you screw things up royally.

Here's one way to look at executive compensation: look at how much a CEO earns and then estimate how much he could earn doing something else. The difference provides an estimate of the margin by which he's overpaid and, given that S&P 500 CEOs never seem to leave leave for higher-paying jobs, you have to think that margin is pretty wide.