181–190 of 203 posts
Earlier quoted context omitted.
Correct. They get paid what they do because they set their own compensation. Performance has nothing to do with it, unless things get so bad they are removed.
CEOs of publicly traded companies don’t set their comp, the board does.
Earlier quoted context omitted.
A good CEO can create massive value, but the present value of any particular choice of CEO -- which should be an upper bound to the performance-independent pay they are able to negotiate -- needs to be diminished according to the uncertainty in the evaluation. That's where the leverage excuse falls apart: uncertainty is through the roof. Everybody's throwing darts at a dart board and everybody knows it, so if the sto…
I’ve always wondered: if CEO pay was truly tied to their “creating value” then shouldn’t they lose money if they destroy value? If the answer is yes, then why aren’t bad CEOs losing money? If the answer is no, then why do we pretend they are paid in proportion to the value they create?
Better still, that stock compensation isn't really paid for by the company. The costs of paying with equity accrue to shareholders in the form of dilution.
Everyone is free to be a CEO. If salaries are really too high it should be easy to get a CEO position by undercutting everyone else. It’s easy to sit on the sidelines and complain other people are making too much money. Remember that CEOs making less wont result in employees making more. Maybe it’s just me, but HN lately seems dominated by whiny/complaining articles that don’t really contribute any knowledge or enhan…
People are also free to vote for people like Ocasio-Cortez, who are more than willing to take it from the top as it continues to spiral out of whack. You can only displace the bottom for so long, until they get fed up enough and vote for radical change, or worse. That's probably not what most want, myself included, but here we are going from 20:1 in the 70's to 300:1. How far do you think that can reasonably keep til…
It's worth mentioning that the 20:1 from the 70s only covers cash compensation. In the "good old days", execs would also get non-cash compensation: Expense accounts, company cars, executive apartments, country club memberships, etc.
Tax law changes disadvantaged those forms of compensation and are partially responsible for some of that difference.
Earlier quoted context omitted.
> Take an arbitrary dude off the street and give them the experience of a CEO and I bet you that substituting him in would at most lose the company 40% of growth/whatever. Most arbitrary people will crumble under pressure if they are given the experience of a CEO.
This is perhaps the central point of contention in the CEO pay debate. Let's take a scientific perspective of performance, ie using evidence to decide which hypotheses to believe. If we have a situation that's repeatable, say in professional sports, we have a pretty useful basis for deciding who is better. For example a pro soccer player has his entire career recorded by the second. Every touch, tackle, sprint, shot,…
But then you're expecting all CEO's to be 10x and are making a hypothesis that many are probably not. Maybe.
Look at it from the point of the Board. They don't care about the details. They just want to appoint people who will handle it. They don't have the time to supervise every company they're the board members of (possibly a problem of corporate governance to be sure).
So CEO's tend to be the folks who: 1. Get things done and 2. Accept responsibility
As long as they execute on these goals, the Board doesn't care. In fact, they will pay the CEO more if they take such good care of the company that they don't need to be involved at all.
Earlier quoted context omitted.
This is perhaps the central point of contention in the CEO pay debate. Let's take a scientific perspective of performance, ie using evidence to decide which hypotheses to believe. If we have a situation that's repeatable, say in professional sports, we have a pretty useful basis for deciding who is better. For example a pro soccer player has his entire career recorded by the second. Every touch, tackle, sprint, shot,…
I understand the point you're making: CEOs can't be easily shown to be 10x at their jobs the same way that athletes can be. But then you're expecting all CEO's to be 10x and are making a hypothesis that many are probably not. Maybe. Look at it from the point of the Board. They don't care about the details. They just want to appoint people who will handle it. They don't have the time to supervise every company they're…
There are armies of middle managers that could do that at any firm. By the time you're middle management, you know what the firm does. Just pick one of them, pay them a little bit more, and pick another one if it goes wrong.
You won't know the difference.
Earlier quoted context omitted.
Part of OP's point though is that CEO pay is apparently not tied to performance because CEOs still get astronomical pay really regardless of whether or not their company/division performs well. So CEOs just get paid more period. And there's this funny set of myths as to why that is the case. In reality, I think it just boils down to the fact that humans sort of instinctively (or maybe culturally?) like the idea of ro…
> I think it just boils down to the fact that humans sort of instinctively (or maybe culturally?) like the idea of royalty. Until they don't: https://en.wikipedia.org/wiki/French_Revolution
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…
I'd believe in such thing if they were on long-term 10 year schedules and other mechanisms to avoid such manipulations.
Earlier quoted context omitted.
A single raise? Doesn't the CEO make $28MM every year?
His math is correct, shifting the annual salary of $28M to lower employees would be a one time raise, if the CEO is getting a raise of $28M every year then it'd equal an annual salary increase of $3k
Earlier quoted context omitted.
I understand the point you're making: CEOs can't be easily shown to be 10x at their jobs the same way that athletes can be. But then you're expecting all CEO's to be 10x and are making a hypothesis that many are probably not. Maybe. Look at it from the point of the Board. They don't care about the details. They just want to appoint people who will handle it. They don't have the time to supervise every company they're…
If it's just a question of doing things and taking the fall if it goes wrong, why pay for that? There are armies of middle managers that could do that at any firm. By the time you're middle management, you know what the firm does. Just pick one of them, pay them a little bit more, and pick another one if it goes wrong. You won't know the difference.
If only that were the case. Most middle managers are folks who have reached their zenith; they are good enough for their roles but not good enough for the next level. Usually its due to some variation of ego/communication issues.
Despite this though, I kinda agree with you that this should be tried more often. From personal observation, it appears that many companies don't have the flexibility of experimenting with this approach.