Line managers basically never have the final word on pay, at most they sometimes get discretion to move pay around within a defined band. Pay bands are handled by the C-suite in small companies and compensation departments in large companies. Both generally reference databases of "market rate" compensation.

As a rule, people are not paid "what they are worth", they are either paid market rates or convince the company they have a differentiated skillset that warrants compensation beyond what is normal in the market (usually by tying their performance to some important metric). No one has yet found a way to change this from within a corporate structure.

> If you are able to recognise this, surely you have the power and the incentive to change this?

Except in the tiniest of startups, managers and even directors have just about zero say in compensation ranges.