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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?

#71

Post by ForHackernews »

lotsofpulp wrote: post #57
Traster wrote: post #48

Earlier quoted context omitted.

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.

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.

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

#73

Post by devoutsalsa »

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)…

This. A more practical approach would be to embrace the fact that no one really knows what's going to happen & plan accordingly.

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

#74

Post by hervature »

harperlee wrote: post #60
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…

They should then be compensated with a leveraged long-term derivative product that pays based on the stock difference between their company and the industry, 5 to 10 years apart. "You want to be insanely rich? Here's a huge company that's not yours as a resource, now make it so it is the best one in 10 years!"

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).

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

#75

Post by tyingq »

fakedang wrote: post #55
tyingq wrote: post #38

Earlier quoted context omitted.

See Boston Consulting Group, Deloitte, Ernst & Young, KPMG and PwC. And then the second tier below that. They also offer the lead-in service of making your idea into pretty slides with their logo, so it's clear later that they endorsed the idea from the get-go.

Uh, I'm pretty sure BCG is in the first tier, and the others you mention are in the third tier, when it comes to the Scapegoat as a Service business.

I don't mean the tax/audit arm of those companies. They all do the generic management consulting. I left several off. Here's a market share chart: https://imgur.com/a/O1Urjkm

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

#76

Post by lm28469 »

Good luck automating an Elon Musk or a Steve Jobs. Your algorithm would never come up with new ideas like Amazon or Space X

So far "automation" means a bunch of if/else statement or at most a biased deep learning algorithm, this is why they're used on entry jobs, because they're fundamentally not very useful for anything other than pre defined repeatable and easy tasks

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

#77

Post by kaczordon »

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. Our results provide strong empirical support for the idea that CEOs are extremely important to firm performance.”

So I’d say they add significant value.

https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfile...

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

#78

Post by UncleMeat »

nocommentguy wrote: post #9
peshooo wrote: post #5

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

To outsource something you have to be able to unambiguously specify requirements (otherwise costs blow up as you go back and forth). Once you’ve made it truly unambiguous, the next logical step is automation.

It might be different now, but prior to ML approaches working for captchas people absolutely paid for outsourced labor to solve captchas all day. And that was an intentionally un-automatable problem.

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

#79

Post by chrisseaton »

xboxnolifes wrote: post #64
chrisseaton wrote: post #45

Earlier quoted context omitted.

> Why is paying them less not seen as an option? I don't understand - do you think companies are voluntarily paying them money that they don't have to? If you won't pay them what they want they'll go elsewhere to someone that will. Just like you would, I presume.

Yes, but that implies that they bring something valuable to the company if companies are still willing to pay these premiums instead of just moving up an employee to CEO. So, what is the problem in the first place?

> So, what is the problem in the first place?

I don't think there is any problem. Everyone's entitled to as much money as they're able to honestly negotiate.

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

#80

Post by vajrabum »

lotsofpulp wrote: post #57
Traster wrote: post #48

Earlier quoted context omitted.

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.

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.
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