Earlier quoted context omitted.
Why does potential for costly mistakes result in greater perceived value and higher pay?
Higher risk begets higher premiums.
The relationship between contribution and compensation is obvious. If you bring more value to the company, the company compensates you directly with a portion of that value.
But why does a position with greater risk necessitate greater compensation?
EDIT: Everything below here was in the original post. However, I re-read it and realized it had little to do with the relationship between risk and compensation.
I don't buy the idea that managers are liable for the mistakes of their reports. That would cause a snowball effect in large organizations, resulting in extremely high turnover for leadership positions.
Managers share some liability for their reports' mistakes, but they also share some reward for their reports' successes. Those liabilities and rewards are split across all of their reports, resulting in what are usually relatively stable positions within a company. A lazy manager can get along by just regularly pruning reports who produce more liability than reward.