09/12/2013 11:36 am ET Updated Nov 12, 2013

Which CEOs Will Be Brave Enough to Rein in Their Own Pay?

The Institute for Policy Studies just released its 20th "Executive Excess" report on "runaway" CEO pay. The report tracked the 25 highest-paid CEOs over two decades. The key finding? Nearly 40 percent of these executives were fired, or led firms either bailed out in the 2008 financial crash or fined for various and sundry behavior. The findings rub salt in the already open wounds from other recent studies that document growth in CEO compensation -- an 876 percent increase between 1978-2012, versus five percent for the production worker over the same period.

The Institute for Policy Studies aims for headlines; it released the report under the provocative title, "Bailed Out, Booted or Busted." Unfortunately, the release is not likely to get much response from Boards, executives or even shareholders -- anyone with a real say in executive pay. Vitriol is understandable, but is not likely to bring new voices to the table or new energy to the debate about the decision rules for the compensation system that fuel such righteous anger. The public, once again, is the loser.

Nonetheless, the consequences of runaway pay are real. Criticism of executive compensation is commonplace and comes from many corners. Former Treasury Secretary Hank Paulson, who is back in the public eye with his reflections on the crisis, called out the banks for a "colossal lack of self-awareness" as regards the huge bonuses paid in the wake of the 2009 bailout. More wringing of hands -- little progress.

What we have is a classic first mover problem -- i.e. widespread desire for change, but real risks and consequences for a company or executive willing to take the first step.

While the recommendations of the Institute for Policy Studies merit a closer look and could help boards rein in pay and begin to rebuild trust in business, for a CEO to take a leadership position and begin to reverse the trends on compensation is either an admission of guilt or is viewed with disdain by the other members of the CEO club. A board that ignores pay conventions could be seen as lacking confidence in its own executive, an unseemly act in the competitive arena of CEO talent.

That leaves many hoping for a regulatory or legislative solution. Yet the threat of legislation quickly recalls the attempt by Congress to rein in pay in the early '80s -- causing the shift from cash bonuses to equity compensation that fuels much of the problem today. Steven Davidoff's recent Deal Professor column details how simple ideas designed to fix the pay problem go afoul when embedded in regulation. What's a business leader to do?

One answer lies in the power of small groups, acting quietly and offering cover for what is required: a radical simplification and realignment of pay.

A quiet meeting of the minds of the "right" CEOs could address three concerns: one, the complexity of pay packages, two, the design-for-failure, turbo-charged equity-based pay that rewards executives for short-term changes in stock price, and three, the inequity that separates the CEO from the rest of the workers, including, often, his/her own management team.

The changes needed are simple and have been tested. Companies like GE and P&G have kept pay in bounds and have experimented with changes in incentives to reward longer term behavior. Microsoft espouses greater transparency and publishes a simple statement of pay principles. Simple metrics, self-imposed, already exist for keeping CEO pay in sensible relationship to compensation for other managers, or even workers (no hair-shirts required). Signatories to the Aspen Principles for Long Term Value Creation acknowledged the need for clawbacks, and greater long-term orientation in pay.

Who are the "right" CEOs? They are most likely found in the real economy, in companies that still make things, or that depend on teams to drive innovation -- and who must care about their reputations with real consumers and license to operate. It might even include courageous leaders on Wall Street who have raised concerns in the public sphere. But the key here is to build a leadership group small enough to stay quiet until the principles for a radical change are clarified, tested, and then promulgated to a slightly larger group of companies that want to be known for putting society first.

CEOs will not succeed alone; there is still a need for other actors -- activists, consumers and other members of the public -- to offer the sunlight and accountability needed to keep things headed in the right direction.

Unlike many problems that plague the commons, this one is not too complicated to solve. I have no doubt that the right leaders exist and have the wherewithal to drive the change. Who's in?