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Overpaid CEOs 2019

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Re: Overpaid CEOs 2019

#101

Post by skookumchuck »

Traster wrote: post #2

I feel like CEO pay is one of these emergent problems with our current system. We have this group of people whose salaries are just astronomical compared to the average person in the company, and whilst it's true their job could technically make more of a difference these payouts are totally asymmetrical and completely independent of how effective a CEO is.

CEO pay comes out of stockholders' pockets. If you believe corporate money is wasted on them, don't buy their stock.

> completely independent of how effective a CEO is.

It's not for you to judge that, it's for the shareholders to.

Re: Overpaid CEOs 2019

#102

Post by skookumchuck »

munk-a wrote: post #4

The CEO (and upper management in general) pay scale is total BS when viewed through normal compensation lenses, unlike normal people who are paid for their time, upper management is usually compensated on performance -but- they are compensated on the performance of their company (or division) and they get all the pie. Since nobody else's pay is scaling with performance (outside of bonuses which in my experience usual…

> nobody is 100x more efficient than anyone else

Steve Jobs was. Apple was sinking into the muck with a series of CEOs, then put Jobs in the role. Jobs turned the same company around with the same resources and the same employees from a nearly bankrupt company to the biggest company in the world.

That's leadership of ONE man.

Re: Overpaid CEOs 2019

#103

Post by CptFribble »

lefstathiou wrote: post #23

I believe CEOs are compensated what they are in order to get them thinking like “owners” which many “professional” CEOs are not ultimately. Mark Zuckerberg, Steve Ballmer, Gates, Jobs don’t/didn’t need large salaries because their identities were tied to their companies. Owners eat sleep and breath their company in a way the average salaried employee plucked at random from +10,000 employee company will not. To the po…

This is actually pretty insightful, and it leads to an interesting question:

If CEO pay is a rational outcome of protecting the equity in a company, and CEO pay is too high, does that mean there's "too much" equity?

There's some evidence that income inequality is bad for society in some ways, which I tend to agree with if it means inefficient/uneven distribution of resources/opportunities/community investments. In this sense, and considering the previous question of "too much equity," is it possible that a company's market value can be too high?

Re: Overpaid CEOs 2019

#104

Post by skookumchuck »

heydonovan wrote: post #77
munk-a wrote: post #4

The CEO (and upper management in general) pay scale is total BS when viewed through normal compensation lenses, unlike normal people who are paid for their time, upper management is usually compensated on performance -but- they are compensated on the performance of their company (or division) and they get all the pie. Since nobody else's pay is scaling with performance (outside of bonuses which in my experience usual…

You share the company's wealth by offering stock as part of compensation. This works well for the high earning tech employees, who can pay their bills with their first 100k and save the rest or invest it. It doesn't work as well for middle/lower class employees who need immediate cash instead of stocks that they can't always hold until it's worth more. Imagine working for Amazon back in the day for $30k, and come tim…

Oh pooh, I as a lower/middle class employee got a lot of stock options. They were worthless because the company stock sank, but I liked getting the options, and if the company had been managed better I would have made much bank.

> I'd wager most lower income folks would take the money, since that's food on the table.

Instant gratification is a large reason why lower income folks stay poor. (As for "food on the table", lower income people "invest" in lottery tickets. They clearly do have discretionary income.)

Re: Overpaid CEOs 2019

#105

Post by skookumchuck »

reb wrote: post #72
zdragnar wrote: post #16

Earlier quoted context omitted.

And yet, if you took Blizzard CEO's total pay (from the article, I think around $28 mil) and spread that over the nearly 10k employees, everyone gets an extra $3k, which wouldn't do diddly squat for retention. Also, losing 40% of growth would be pretty awful for anyone who has company stock (employees, 401ks, investors) especially if that's year over year.

The extra $3k might not mean a lot, but knowing your CEO gave $28m back to the workers at his or her own expense? I'd argue that kind of thing is great for retention. The challenge, obviously, is that CEO pay is a market and the current, insane pay scale has emerged from it. The only way for it to change would be a) regulation (good luck to the enforcers), b) a global moral awakening among CEOs that causes a sufficie…

> is great for retention.

So move to a company that meets your standards. I don't really understand the complaining.

Re: Overpaid CEOs 2019

#106

Post by throway88989898 »

Traster wrote: post #2

I feel like CEO pay is one of these emergent problems with our current system. We have this group of people whose salaries are just astronomical compared to the average person in the company, and whilst it's true their job could technically make more of a difference these payouts are totally asymmetrical and completely independent of how effective a CEO is.

> emergent problem

How exactly is it a problem? Surely we'd rather overvalue CEOs than under-serve them?

> these payouts are totally asymmetrical and completely independent of how effective a CEO is

What are good metrics for this claim? How should we measure effectiveness-salary ratio? Why should they not be asymmetrical?

Just curious and trying to clarify the points being made.

Re: Overpaid CEOs 2019

#107

Post by _cs2017_ »

If EA Board could snatch a CEO they like for $5M/year, they would. So why don't they? I'm sure there are thousands of professional managers with solid game industry experience who'd be ecstatic to be offered a CEO position in either company at $5M / year or less. The Board clearly think they are not good enough, and limit their candidate search to people with very special credentials (e.g., those who've served as top executives in large companies, etc.). Such a high bar limits the candidate supply a lot, and then the competition for those candidates between companies drive up the pay (quite similar to NBA or NFL).

Why is Board so obsessed with credentials? Is it because they want to play it safe (kinda like dumb execs choose Oracle over open source solutions because they want to protect themselves from criticism by going with a famous brand)? Or is it because those credentials are truly imporant for the success of EA?

I don't know for certain but I suspect the answer is kinda in between. The quality of a CEO candidate is really hard to judge. So the Boards think like this:

> We'll screen for all the obvious things (experience, references, track record, culture fit, etc.). Hundreds of people will pass that screen. We have no clue of how to choose among them, so we might as well go for someone who's done it before. Perhaps we don't need to be so restrictive. But there's a chance it actually does matter, say maybe 10% chance that a person who's been a top exec before will do better than candidates without such credentials. A good CEO can increase corporate value by billions of dollars over a few years, so even a 10% chance is worth a lot. So let's go bid for one of those bigshot ex-CEOs, even if that means we have to pay an extra $20M/year.

So in some sense, high CEO pay is due to the "religious" belief that whoever made it to the top is super good.

Maybe this religious belief is actually rational, maybe not. I kinda suspect the latter, since other countries seem to pay CEOs a lot less; I find it unlikely that the US CEOs have such unusually high skill compared to the rest of the world. But I don't have high confidence in my opinion.

Re: Overpaid CEOs 2019

#108

Post by djakjxnanjak »

munk-a wrote: post #53
B-Con wrote: post #32

Earlier quoted context omitted.

I don't like the word "efficient" in contexts like this, I prefer "effective". Yes, some people are simply 100x more effective than others.

In three days you can accomplish what someone else (assuming they had training on par with what you received) would take a year to do? Assuming you step in and out of the office four times a day, do you think it's reasonable to hire someone solely to open and hand you an umbrella when you leave the office and take it from you when you return as a fair trade to the minute you might spend fiddling with the umbrella cov…

> (assuming they had training on par with what you received)

Sure, if the board were running a karate-kid-style boot camp where they trained people to be CEOs, those kids market wages wouldn’t be that high. But in fact they are hiring CEOs who already have training and experience. There is no need to get into a nature vs. nurture debate, CEOs are being paid for both.

Re: Overpaid CEOs 2019

#109

Post by djakjxnanjak »

jjoonathan wrote: post #39
jlawson wrote: post #18

Earlier quoted context omitted.

I just want to point out a mathematical error in your post. You said, "nobody is 100x more efficient than anyone else". This is a reasonable (though not strictly true) statement by itself. But the implication is wrong - nobody needs to be 100x more efficient/effective to justify a 100x pay differential. Consider an example: * Company earns 1 billion per year. * Normal-Person will increase profits 5%. * Super-Exec wil…

That should only affect Super-Exec's base pay if they can prove up front that choosing them can be expected to increase profits by 10%. Otherwise the "10% of profits" expected value figure needs to be diminished according to uncertainty -- which will send it straight back down out of the stratosphere. Yet that doesn't happen. Which suggests a different game is being played.

When a company increases in value by tens of billions and then the CEO takes home hundreds of millions, it seems like there could still be a big discount happening.

Re: Overpaid CEOs 2019

#110

Post by lixue »

munk-a wrote: post #53
B-Con wrote: post #32

Earlier quoted context omitted.

I don't like the word "efficient" in contexts like this, I prefer "effective". Yes, some people are simply 100x more effective than others.

In three days you can accomplish what someone else (assuming they had training on par with what you received) would take a year to do? Assuming you step in and out of the office four times a day, do you think it's reasonable to hire someone solely to open and hand you an umbrella when you leave the office and take it from you when you return as a fair trade to the minute you might spend fiddling with the umbrella cov…

"assuming they had training on par with what you received" feels unfair: Generally, what makes someone a 10x engineer is exactly that most people lack that level of training, experience, and skill. It's not about innate talent, but it's still a valuable, rare, and therefore marketable skill.

Achieving 100x results isn't something you can guarantee, and it doesn't even involve writing a lot of code. It comes from blocking off a week to automate a task, and never having to deal with it again. It comes from having the experience and political capital to veto a project that would have wasted a year, because you've seen it go wrong before. It comes from improving some tools for the customer service reps, so that they're 5% more efficient (which then adds up to hundreds of hours a day if you're large enough).

Anyone CAN do this, but the people who have the insight, motivation, and skill to actually DO it are rare, and a smart organization should desire to keep them around for years just in case they do it a second time.

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