I don't think parent is talking about risk to the executive, but rather risk to the company.
Or to put it another way, executive compensation must be order of magnitude comparable with potential personal gratification should the executive act in their own (and not the company's) best interests.
Paying an executive less than that is asking someone to make a suboptimal personal choice.
And while you may find people willing to do that (because ethics), you won't reliably always find good people who make that sacrifice.
To me, this sounds like general purpose wage competition. I mean, even doing my own job for much less than the going rate would be a suboptimal personal choice, a sacrifice, etc. My wage level is enough to ensure that acting in the company's interest is also in my personal interest.
In fact, every player who is involved with the company (workers, suppliers, shareholders, customers, etc.) is assumed to be acting out of self interest. What management does is to arrange matters so that self interest coincides with a unified interest that is the business entity.
An executive can, and should, arrange matters so that they come out ahead of the average worker even if they fail at their jobs. In that case, their risk is still lower than the average worker's.
Maybe they take some kind of big psychological risk? I doubt it. I'll bet that they are as rational about their jobs as we are about ours, and they see it as a pure transaction with no emotional attachments.