Yah, but they're a deal compared to the alternative!
CEOs are hugely expensive – why not automate them?
121–130 of 363 posts
Re: CEOs are hugely expensive – why not automate them?
#122CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. So if you think CEO Candidate X will make you a 3x return on your investment, but CEO Candidate Y will make you a 5x return, it's almost certainly worth it to pay him/her the extra $200K to get you there, if that's the…
There's another thing that CEOs do which is provide values guidance and inspirational leadership for a company. That's not something a robot can do...yet.
That might be what they are supposed to do but apart from my current company, this has happened in precisely none of my previous employers (about 5 of them).
At one company, I didn't even know who the CEO was. We had some company party because we won an award and I had to ask my colleague who the guy was who was speaking. Awkward (but at least I didn't have to ask the CEO who he was).
Re: CEOs are hugely expensive – why not automate them?
#123Earlier quoted context omitted.
I find it funny that people throw out decades of history. Options contracts, as you propose, introduce the incentive for extreme risk taking because doing "normal boring" things literally doesn't pay. It's one of the main arguments for stock compensation because if the company does poorly, the CEO directly feels it where it hurts (the wallet).
Replace option contracts with RSUs or a vesting cliff and see how closely that resembles the VC fiefdom
this all sounds a lot like CEO talk to me...
Re: CEOs are hugely expensive – why not automate them?
#124Earlier quoted context omitted.
> you have never been on a board of a company and had the responsibility to hire and fire them. Think about that statement, just for 5 seconds. Please. You do realize very, very few people meet this criteria. And their opinions still matter because they are impacted.
People in the comments are making definitive statements that you can't evaluate CEOs. They should think about it for 5 seconds and realize that they are not experts in the domain.
So you never voice opinions about topics that you aren't in expert on, otherwise you'd be a flaming hypocrite, right?
Cool!
Re: CEOs are hugely expensive – why not automate them?
#125Earlier quoted context omitted.
The problem is that the best CEOs might not go for that. There are a lot of long term things that can impact a company for the negative, and you don't want your CEO bailing to a different company the moment that some macro event (semiconductor shortage, new competitor, global pandemic, etc) comes along and alters the long term upside of your company. You want a CEO who is going to stick around and make the best possi…
> The problem is that the best CEOs might not go for that. We created that system, we can change it. CEO entitlement is part of the problem because it has become burned into our culture that they are demigods. They are not.
Ever worked for a company with a truly garbage CEO?? Good heavens, when you’ve got a moron there, you might as well be an air traffic controller at asshole airport.
Re: CEOs are hugely expensive – why not automate them?
#126Earlier quoted context omitted.
And so they go for stock buyback strategies. Reduce the supply, the stock skyrockets, cash in, leave.
You need profits for stock buybacks. Buybacks are just superior to dividends as a way to return capital.
Dividends ought to not be at a tax disadvantage over capital gains for this reason.
Re: CEOs are hugely expensive – why not automate them?
#127Earlier quoted context omitted.
They why do people who own the companies not oust board members who are wasting their money?
Because the people who own companies are either a) disinterested index funds, or b) members of the same plutocrat class as the board members and CEOs.
Why are the people in b) okay with overpaying for something?
Re: CEOs are hugely expensive – why not automate them?
#128There’s talk on this thread that boards choose a CEO based on their marginal competence.
I doubt there’s much evidence this is true.
Boards select “the best person they can justify to shareholders.” Being expensive is a feature. A board member invents reasonable criteria for choosing a candidate: years of relevant industry experience at the VP level, advanced business degrees, charisma and “It” factor, recommendations from influencers, etc.
As a result, the candidate pool shrinks from “honestly, lots of people could do this job” to “we have to choose one of three candidates.”
From there, it’s all supply and demand curves, where the company has artificially crunched the supply and the price skyrockets.
The solution isn’t to automate the leader. The solution is to admit to ourselves that a highly-relational project manager with a decade at the company could lead it as well as the CEO, if not better.
Re: CEOs are hugely expensive – why not automate them?
#129People who have a problem with high wages need to have a problem with commanding high budgets, but none of them do. The entire issue is a canard.
Re: CEOs are hugely expensive – why not automate them?
#130Earlier quoted context omitted.
You need profits for stock buybacks. Buybacks are just superior to dividends as a way to return capital.
Dividends ought to not be at a tax disadvantage over capital gains for this reason.
The problem is also unrealised gains vs realised ones. I don't pay any tax on the stock price increasing. I have to pay tax on dividends.
If I don't need the money, I can just let it continue to grow tax free.