As it seems unlikely that Vince Cable's plan to empower shareholders will greatly rein in bosses' pay, George Monbiot is proposing a simpler alternative - a maximum wage law. I'm not sure that either proposal is good enough.

Granted, they might be. There's an element of the arms race about bosses' pay. It's possible, therefore, that anything that can achieve co-ordinated control of pay will reverse this. If company A knows that company B is not paying silly money (either because of a law or shareholder activism), then it won't do so either. The bubble thus bursts.

And this mightn't have adverse effects on incentives. Insofar as CEOs' demand for high pay is a positional good - they want better pay than their rivals - anything that curbs their rivals' pay will curb theirs.

So far, so good. But there's an offsetting danger.

The problem is that CEOs are status-seeking animals; this is why they try to get the top job. If they cannot achieve high status through their salary, they might therefore try to achieve it by other means - for example by building corporate empires, by pursuing non-financial perks such as even more lavish head offices, company jets and suchlike. Or they might simply appropriate corporate assets for themselves; remember, the reason why high pay is necessary now is to bribe them not do so this.

In this sense, capping pay might well have adverse effects. As evidence, remember the 1970s. When high tax rates deterred bosses from getting more money, the result was overly large and inefficient conglomerates, and a management obsessed by status - the legendarily key to the executive toilet - which created a poisonous industrial relations atmosphere.

My point here is that high CEO pay is not the disease, but the symptom - of the fact that CEOs have too much power. Treating the symptom is not sufficient, and might even be counter-productive. What is needed is to rein in bosses' power. And given the difficulties of getting shareholders to do this - asymmetric information, the problem of collective action and so on - it might well be that workers are better able to do so. And I'm talking about far more than merely having employee representation on remuneration committees.

What we're seeing with the debate about bosses' pay is, I fear, a similar thing to what we saw with Clegg's call for more employee share ownership. There's a tendency for liberals and the 'moderate' left to think that a halfway house between full capitalism and full socialism is better than both. This is a prejudice which is not always or necessarily true.

Now, you might object that more radical means of curbing bosses' power are just not feasible right now, whereas limits on bosses' pay are.

True. But what's feasible is not always what is efficient.