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CEOs are hugely expensive – why not automate them?

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Re: CEOs are hugely expensive – why not automate them?

#131

Post by throwawayboise »

temp667 wrote: post #109
ARandomerDude wrote: post #42

CEOs 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…

And you have only one CEO - so their comp is expensive, but not hugely expensive relative to total org costs. Apple has Tim Cook. In terms of investors evaluation of his ability to generate profits - let's say apple is going to do $400B in sales, and you think Tim's approach over time will yield a 3% improved margin. Is he then worth $12B/year? CEO's have enormous influence on a companies direction. Investors will au…

Yes, comparing CEO compensation to what line workers make is a standard play for the outrage promoters, but it really isn't related. When one slice of the pie is already small, making it smaller doesn't make a lot more available for everyone else.

Re: CEOs are hugely expensive – why not automate them?

#132

Post by nataz »

woeirua wrote: post #116

I too used to think that CEOs were a waste of resources, and that they had minimal if any impact on most companies. But I think people grossly underestimate how important CEOs are, because the vast majority of them do a decent job. When you swap out somebody who does a decent job for another person who performs at about the same level it's not really that noticeable. That said, you'll come to appreciate those "decent…

I'll second this comment.

Armchair evaluation of CEOs suffers from survivorship bias.

Decent/good CEO keeps the business moving. A bad CEO can sink a company.

Boards/owners (dependant on corporate structure) can mitigate results.

Re: CEOs are hugely expensive – why not automate them?

#133

Post by lbriner »

unfamiliar wrote: post #28
klyrs wrote: post #10

Why is paying them less not seen as an option? I've seen multiple startups struggle because their CEO makes more than 10 qualified technical staff, where the employees burn out because there's no budget to hire the technical staff the company needs.

Presumably because the market dictates their salary, not a vague notion of what they should be paid. Or, to reframe the question: why don't people hire cheaper CEOs?

I think part of the problem is that we equate cost to value. Unless I am employing a CEO who previously earned big bucks and has taken a pay cut, someone on $50K simply doesn't seem to be as good as someone on $500K.

Of course, there are people who could do really well on less but then how many of the cheaper CEOs would then ask why they can't be paid more if their companies are making multi-millions and it is a lot to do with the CEOs strategic decisions?

To be fair, a lot of leadership is about confidence in yourself and people who are confident will often ask for a high salary.

To be fair, I don't know what the distribution of salaries in the UK is but there are plenty of company directors and CEOs who are definitely earning below £100K-£200K, even at financial companies. (about $140K-$240K) whereas in the US, I think it is much higher.

Re: CEOs are hugely expensive – why not automate them?

#134

Post by lotsofpulp »

vajrabum wrote: post #80
lotsofpulp wrote: post #57

Earlier quoted context omitted.

They why do people who own the companies not oust board members who are wasting their money?

Likely because most public companies are mostly owned by funds of one sort or another which either don't hold the stock long term or own the stock because of indexing. In the former case, the incentive is to select for CEOs who raise the stock price in the short term. In the latter case, there is no incentive for fund managers to influence management at all.

The discussion is why the board does not select cheaper CEOs. In the case of these supposed funds that are not interested in the stock long term, is the claim that a more expensive CEO will deliver them better short term results? If not, why would a fund that cares about short term results want to overpay for a CEO?

Re: CEOs are hugely expensive – why not automate them?

#135

Post by lbriner »

peshooo wrote: post #5

"If a role can be outsourced, it can be automated." I really don't see the logic in this statement.

I think the logic is that if you can describe what you need delivered (by the contractor) then an automated system could take the same inputs to deliver the same output.

It is not necessarily always true right now (you can't get robot building contractors just yet) but that is not to say the logic is true that the outsourced work could be automated.

Re: CEOs are hugely expensive – why not automate them?

#136

Post by texasbigdata »

ForHackernews wrote: post #63
ARandomerDude wrote: post #42

CEOs 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…

The problem is there's no way to evaluate if CEO($10M) is actually that much better than CEO($2M). How would you retroactively test the counterfactual of hiring the cheaper candidate? Maybe in the future the stock price of robo-CEO companies can be used as a baseline. If you can't beat the robot index, then you're fired. (Obviously this will never happen because the board members are other CEOs, but you get the idea)…

You're spot on. That's why Harvard Busiess Reviews "best CEO" list is a trailing version of multi-year TSR (total shareholder return) combined with some ESG metrics. It's the best you can currently do.

Re: CEOs are hugely expensive – why not automate them?

#137

Post by hammock »

MattGaiser wrote: post #118
sn41 wrote: post #104

Earlier 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.

>You need profits for stock buybacks.

You merely need capital. Lots of buybacks are funded by debt

Re: CEOs are hugely expensive – why not automate them?

#138

Post by wrigby »

andromeduck wrote: post #126
MattGaiser wrote: post #118

Earlier 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.

Are they not? I thought qualified dividends (that is, dividends on stocks that have been held long enough to qualify for long-term capital gains) are taxed at the long-term capital gains rate.

Re: CEOs are hugely expensive – why not automate them?

#139

Post by [deleted] »

SavantIdiot wrote: post #124
spullara wrote: post #120

Earlier quoted context omitted.

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!

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