Management doesn't always make more than the engineering staff. The senior level engineering staff should be actively involved with business level analysis and decision making and charting the technical roadmap for the company. When this is the case, the senior technical staff can make quite a bit more than the business managers they work with everyday.

One of the popular myths of business is that the manager should be paid more then the people he/she manages. IMO, you find this notion more deeply entrenched in buracracies than in functional, agile teams.

To put it another way: compensation is supposed to reflect the value of a person's contribution to the company. There are stellar business managers and average managers, and there are stellar engineers and average enginers. If you have a stellar engineer that cranks out money making technology and has deep knowledge of the company's technologies, isn't it in the company's best interest to compensate this person more aggresively than an average business manager who happens to be managing this stellar engineer? What is the opportunity cost of losing that engineering expertise and skill set because you neglected this valuable resource?