The MBA Myth and the Cult of the CEO • Hacker News Board

Re: The MBA Myth and the Cult of the CEO

#151

Post by yowlingcat » Mon, Mar 04, 2019, 4:18 PM UTC

whack wrote: post #90

jdavis703 wrote: post #25

Earlier quoted context omitted.

Can you elaborate on why they’re “entirely orthogonal?” Since this increased compensation is stock, aren’t they at least somewhat related?

You can pay someone the exact same target-compensation, while still shifting it away from cash, and towards stock. For example, giving someone a stock grant of 1000 shares of GOOG, instead of paying them $1.1M in cash.

There are still issues with this approach, although they're a bit more subtle. Think about Valeant circa 2015 -- definitely taking a short term approach of acquiring and stripping pharma companies, which did positively impact their stock price. But, they did it in an unsustainable manner.

Re: The MBA Myth and the Cult of the CEO

#152

Post by yowlingcat » Mon, Mar 04, 2019, 4:20 PM UTC

Here's my question: how do you create incentive structures towards sustainable operation? Is this even possible or feasible inside of a company, or is it the market's job to operate such structures, using corporate formation, dissolution, aggregation and division?

It seems very hard to create an incentive structure that won't be gamed.

Re: The MBA Myth and the Cult of the CEO

#153

Post by darawk » Mon, Mar 04, 2019, 5:12 PM UTC

yborg wrote: post #130

darawk wrote: post #52

I've done these same analyses before as well, and more. This is the correct analysis to do if you're looking to build an alpha-generative trading strategy. It is not necessarily the correct analysis to do if you want to measure actual CEO performance. If you want to measure CEO performance, you need to look at growth in fundamentals, not share price. The share price is going to reflect the market's beliefs about the…

Did you read the article? The objective was to prove or disprove the Jensen thesis that CEO compensation should be tied to gains in stock price because CEOs affect stock price. They were NOT attempting to answer the question of whether or not CEO quality and compensation affects the success of their underlying businesses.

Did you? They were attempting to do both. I specifically called out that it was a legitimate way to do analyze the compensation issue.

Re: The MBA Myth and the Cult of the CEO

#154

Post by omouse » Mon, Mar 04, 2019, 5:30 PM UTC

lordnacho wrote: post #6

pacala wrote: post #4

Earlier quoted context omitted.

To play devil's advocate: The primary function of a manager is to say "No". As one goes higher and higher up the hierarchy, one has to say "No" to pushier and pushier subordinates, and the cost of every misplaced "Yes" is higher and higher. While leaders just under the CEO may understand the firm situation just fine, they may also be unable to say "No" to enough bad ideas for a myriad reasons, including lack of polit…

> The primary function of a manager is to say "No". I'm a manager, and I can't really see this being the key job description. But if it was, why would that have gotten harder in the last few decades?

The job description is prioritization which is essentially saying "yes" or "no" to certain tasks. Especially in tech companies, the front line reports can always find something to do. Software developers want to automate everything or build cool things or use the latest tech. Managers are there to guide that, and that means saying "focus on A, B and C" because there's a gigantic list of tasks but saying no to 99% of that list makes the company perform better.

Re: The MBA Myth and the Cult of the CEO

#155

Post by jiveturkey » Mon, Mar 04, 2019, 5:36 PM UTC

pembrook wrote: post #11

One of the best things to come out of so-called “big data” is the slow destruction of the human ego. I read an interesting joke few months back (not sure where, might have been in Capital Minded), the gist of it was basically: If 99% of people who buy corporations for a living can't beat a monkey throwing darts over time...why do we believe people who run corporations for a living are any smarter? They're both lookin…

> One of the best things to come out of so-called “big data” is the slow destruction of the human ego.

True! But this isn't a case of big data. This is just data. They only looked at 8500 CEOs and only did basic statistical analyses, ie not "big data".

Re: The MBA Myth and the Cult of the CEO

#156

Post by jiveturkey » Mon, Mar 04, 2019, 5:40 PM UTC

darawk wrote: post #52

I've done these same analyses before as well, and more. This is the correct analysis to do if you're looking to build an alpha-generative trading strategy. It is not necessarily the correct analysis to do if you want to measure actual CEO performance. If you want to measure CEO performance, you need to look at growth in fundamentals, not share price. The share price is going to reflect the market's beliefs about the…

Thank you.

I also wish they would have measured startup (ie, private) CEO performance. Of course that's quite hard because financials are private and all the failed companies have no records left, and if they did, good luck teasing the data out.

Re: The MBA Myth and the Cult of the CEO

#157

Post by dbalbright » Mon, Mar 04, 2019, 7:45 PM UTC

bkohlmann wrote: post #72

The lead author is a friend of mine. The beautiful thing is that he got an...MBA from Stanford. I’m consistently intrigued by his observations about the world. He doesn’t let his own background get in the way of questioning established wisdom. The fund he runs now is based on a belief that private equity is seriously flawed...which he discovered by working as an analyst for one of the top firms. He hosts a fantastic…

>This email list is only open to accredited investors. By clicking "subscribe to this list," you are representing that you are an accredited investor.

Is that for his own protection? People aren't going to drop from helicopters into my home, are they?

Re: The MBA Myth and the Cult of the CEO

#158

Post by AznHisoka » Mon, Mar 04, 2019, 7:48 PM UTC

pembrook wrote: post #77

AznHisoka wrote: post #76

Earlier quoted context omitted.

“If 99% of people who buy corporations for a living can't beat a monkey throwing darts over time...why do we believe people who run corporations for a living are any smarter?“ Because the 1st requires predicting what other investors think about a company or the economy (after all, the stock price doesn’t move in align with its profits/revenues). Not whether a company will be successful. The 2nd simply requires knowin…

What you're describing is the "Greater Fool Theory" of asset pricing...where the emotional temperature of other investors sets the price for an asset. This is true only for assets that don't produce cash flows and thus can't be valued using traditional valuation models (ie. like gold, crypto, etc). Businesses on the other hand are properly valued for their profit/revenue potential given the available information at t…

Point taken. I was talking more about trading, not investing long-term. If we're talking about long-term investing, most funds have strict limitations, and can't be too focused on any one single stock/sector too much.

Re: The MBA Myth and the Cult of the CEO

#159

Post by skookumchuck » Mon, Mar 04, 2019, 10:38 PM UTC

brohee wrote: post #139

skookumchuck wrote: post #86

Earlier quoted context omitted.

The CEO's decisions matter. For the most obvious example, see Apple. A series of CEOs drove Apple to near bankruptcy, then Jobs became CEO. With the same employees, plant, equipment, culture, etc., he turned it into the largest company in the world. He did something similar to Pixar. Microsoft is another example. Same company, same staff, same products, 3 CEOs, stark difference in results.

Apple was eaten from the inside by Next, it's definitely not Jobs alone, it's Next using Apple capital and brand.

Jobs created Next, too.

Re: The MBA Myth and the Cult of the CEO

#160

Post by skookumchuck » Mon, Mar 04, 2019, 10:38 PM UTC

ALittleLight wrote: post #133

skookumchuck wrote: post #118

Earlier quoted context omitted.

The man in charge always gets the credit. I have some AMZN stock. I wouldn't trade Bezos for someone cheaper. Would you?

To my knowledge Bezos gets paid only 80 grand a year - so no.

That's salary, not compensation.