CEOs are hugely expensive – why not automate them? • Hacker News Board

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

#241

Post by slantaclaus » Mon, Apr 26, 2021, 6:03 PM UTC

jordanpg wrote: post #207

I would love it if someone could explain to me like I'm 5, why it is exactly, that CEOs are so highly paid. I get that it's hard. I get that there are long hours. I get that it requires long-term strategic thinking. None of that helps me understand O(100M) "compensation." I'm pretty sure that executives get paid so much because of (a) their rolodex (ie. their ability to get certain people on the phone) and (b) becaus…

I’m not sure I could adequately explain this to a 5 year old, but it really just comes down to the perception of supply and actual demand.

I say perception because even though a “random person off the street” might be able to successfully run a Fortune 500 company, most of them wouldn’t and the boards/shareholders won’t tolerate the risk of allowing untested leaders to run massive companies. On the flip side, just because someone has experience and a good track record of results doesn’t mean they will succeed in future endeavors—a good example of this is that Pepsi guy (John Sculley) who took the helm at Apple and drove its business to the brink of death, this despite being paid in 1987 the highest salary of any company in the valley.

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

#242

Post by xwdv » Mon, Apr 26, 2021, 6:04 PM UTC

Traster wrote: post #48

unfamiliar wrote: post #28

Earlier quoted context omitted.

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?

The simple answer is that people don't hire cheaper CEOs because the people who hire CEOs are the boards of companies and the boards of companies are mainly staffed by CEOs of other companies who unsurprisingly are incentivized to advocate for higher CEO pay.

Wrong. You hire a cheap CEO, you will get what you pay for. The best people aren’t going to work for cheap, so you’ll get a shitty or mediocre CEO who will wreck the company.

Maybe sometimes you get lucky and get a great CEO for cheap, but that’s not sustainable. You’re fighting the trend.

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

#243

Post by anigbrowl » Mon, Apr 26, 2021, 6:04 PM UTC

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…

Lots of people said the same thing about market traders and yet a great deal of their activity has been successfully automated.

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

#244

Post by koonsolo » Mon, Apr 26, 2021, 6:04 PM UTC

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 think this is the case with any manager. A great manager will not be noticeable. Things just seem to run fine.

But when you come across a bad manager, you will surely notice!

Sad for them that they only get noticed when they are bad at their job, not really when they are good or great.

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

#245

Post by contingencies » Mon, Apr 26, 2021, 6:05 PM UTC

The real job of upper management in the 20th and 21st century is to learn things, because change is the constant thing that's going on. - Alan Kay (2017)

... via https://github.com/globalcitizen/taoup

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

#246

Post by effingwewt » Mon, Apr 26, 2021, 6:06 PM UTC

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…

Hahaha found the CEO?

'Jesus Christ himself isnt worth 500x the worker's wages'

CEOs provide no real value, period. They also get golden parachutes even if they sink the ship.

It's inexcusable and I'll bet dollars to donuts 99% of companies don't even need one.

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

#247

Post by koonsolo » Mon, Apr 26, 2021, 6:10 PM UTC

makapuf wrote: post #93

kaczordon wrote: post #77

Earlier quoted context omitted.

There was a Danish study that showed that a death in the family of a Danish CEO led, on average, to a 9 percent decline in the profitability of the corporation. If it was the death of a spouse, the decline was 15 percent and, if it was a child who died, 21 percent. From the study: “Interestingly, similar deaths experienced by individual members of the board of directors do not significantly affect firms’ outcomes. Ou…

To be honest, this shows that a dysfunctional CEO (for completely understandable reasons) leads to a nonprofitable firm, not that value is added. You could say that people with no or defective keyboard have a hard time programming, but the best keyboard does not add significant value to a developer.

I like the keyboard analogy, because you won't notice a good or great CEO, but will notice a bad one.

The only thing that you didn't consider is in CEO or management world, most keyboards are broken, and only a few work decent enough to do proper programming. That's why they are so valuable.

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

#248

Post by klyrs » Mon, Apr 26, 2021, 6:11 PM UTC

chrisseaton wrote: post #236

klyrs wrote: post #235

Earlier quoted context omitted.

The conversation around Mitchell Baker's compensation was particularly illuminating, I think. Why do nonprofits pay CEOs millions a year? Because executives expect to be paid that much, and it would be demeaning to pay less.

In other words, normal market forces. The same reason you're paid whatever you're paid.

The "invisible hand" of plutocrats isn't the traditional meaning of "market forces", is it?

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

#249

Post by koonsolo » Mon, Apr 26, 2021, 6:12 PM UTC

rybosworld wrote: post #184

makapuf wrote: post #93

Earlier quoted context omitted.

To be honest, this shows that a dysfunctional CEO (for completely understandable reasons) leads to a nonprofitable firm, not that value is added. You could say that people with no or defective keyboard have a hard time programming, but the best keyboard does not add significant value to a developer.

Agreed. If anything, this study makes the case that one person with sweeping decision power is at best a liability.

In that case, take away the CEO and see what happens. It can't be that hard.

You don't know any companies without CEO's? Exactly!

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

#250

Post by anigbrowl » Mon, Apr 26, 2021, 6:14 PM UTC

kaczordon wrote: post #77

alexgmcm wrote: post #27

I can't help but feel that CEO's are over-valued and it's fundamentally an attribution problem as it's hard to know how much value they actually add. A comparison would be to fund managers and how the rise of index funds showed they actually added very little value in many cases, and weren't worth their fees.

There was a Danish study that showed that a death in the family of a Danish CEO led, on average, to a 9 percent decline in the profitability of the corporation. If it was the death of a spouse, the decline was 15 percent and, if it was a child who died, 21 percent. From the study: “Interestingly, similar deaths experienced by individual members of the board of directors do not significantly affect firms’ outcomes. Ou…

Conversely, you could infer that board members are largely decorative, and of course any effect would be a) inversely proportional to the # of board members, b) proportional to the small time commitments that directorships typically involve, and c) mitigated by the fact that board members are/have somewhat supportive peers whereas the CEO does not.

It's an interesting data point but the conclusion seems overbroad. One might equally draw on this conclusion to say that families of regular people probably need proportional levels of economic support following the death of a family member.