4 ms·

Then why is the CEO the highest paid person ?

fredkbloggs 11y ago
At the risk of sounding glib, they're paid the most because they're the best at convincing people who control money to pay them. Also, in no small part, because in most cases the people who control the money have little or no incentive to care what happens to it, and therefore are subject to every kind of conflict of interest and cognitive bias known to man.
crdoconnor 11y ago
Pay correlates with power not effectiveness. The highest paid in any organizations are those with the most power and the highest paid CEOs are those who run the biggest corporations.
- maerF0x0 11y ago
  I dont understand how they get that power. I guess they convince those with lots more money to give them that much? I mean, if all the science is true, how does someone with so much money (say a board of directors) ever decide to pay someone that much? Clearly they're all ignoring the facts, but why? They dont seem to have anything to gain by paying someone too much, afterall their own stock/equity is at stake here.
  - dingaling 11y ago
    > how does someone with so much money (say a board of directors) ever decide to pay someone that much Most of the board will be executives in other companies; by voting high the salary of the CEO, they're nudging the average which benefits them when wearing their executive hat. In the UK I have money in two Building Societies ( mutual banks ) and each year the members vote on candidates for the Board. It's amazing how many of them hold three or more different board positions and a couple of executive slots.
  - sjg007 11y ago
    The board of directors are usually all highly paid execs. Like votes like. Also to get a CEO to change jobs or even promote (from another company), they have to offer an attractive package. Then stocks are a force multiplier.
  - crdoconnor 11y ago
    >I dont understand how they get that power. Connections. Yale/Harvard network, Ex-McKinsey network, We're-on-the-board-of-five-public-companies network, Family, etc. >I mean, if all the science is true, how does someone with so much money (say a board of directors) ever decide to pay someone that much? Mutual back scratching, favor exchange and membership of the in-crowd.
lohengramm 11y ago
This is just how the system works: it is a pyramid, and people who happen to be on top earn more, despite any value he or she can bring to the table. There is of course some relation between value and position in this pyramid (particularly true near the bottom of it), but this is definitely not always true. As for the choice of this structure, well, today everyone expects a pyramid structure, and I believe there is no indication of change (I might be wrong on that). It is surely not a perfect system given most definitions of "meritocracy", but I believe it is the best we can do now.
a3voices 11y ago
Because they don't take new jobs unless they're given large raises.
vlehto 11y ago
CEO can't really improve a company that much. (CEOs typically don't have any part in the actual production. And very small part in sales.) But CEO can fuck up big time. If you would hire CEO with low pay, you have to choose inexperienced CEO. So you have no track record. And the chance that you have fuck-up is relatively high. CEO's are paid a lot to "guarantee" that they are not idiots. Because accidentally hiring an idiot would be absolutely devastating. In other words: The CEO holds the company as a hostage, and you pay him to remain insignificant.

At the risk of sounding glib, they're paid the most because they're the best at convincing people who control money to pay them. Also, in no small part, because in most cases the people who control the money have little or no incentive to care what happens to it, and therefore are subject to every kind of conflict of interest and cognitive bias known to man.

crdoconnor 11y ago

Pay correlates with power not effectiveness. The highest paid in any organizations are those with the most power and the highest paid CEOs are those who run the biggest corporations.

maerF0x0 11y ago
I dont understand how they get that power. I guess they convince those with lots more money to give them that much? I mean, if all the science is true, how does someone with so much money (say a board of directors) ever decide to pay someone that much? Clearly they're all ignoring the facts, but why? They dont seem to have anything to gain by paying someone too much, afterall their own stock/equity is at stake here.
- dingaling 11y ago
  > how does someone with so much money (say a board of directors) ever decide to pay someone that much Most of the board will be executives in other companies; by voting high the salary of the CEO, they're nudging the average which benefits them when wearing their executive hat. In the UK I have money in two Building Societies ( mutual banks ) and each year the members vote on candidates for the Board. It's amazing how many of them hold three or more different board positions and a couple of executive slots.
- sjg007 11y ago
  The board of directors are usually all highly paid execs. Like votes like. Also to get a CEO to change jobs or even promote (from another company), they have to offer an attractive package. Then stocks are a force multiplier.
- crdoconnor 11y ago
  >I dont understand how they get that power. Connections. Yale/Harvard network, Ex-McKinsey network, We're-on-the-board-of-five-public-companies network, Family, etc. >I mean, if all the science is true, how does someone with so much money (say a board of directors) ever decide to pay someone that much? Mutual back scratching, favor exchange and membership of the in-crowd.

lohengramm 11y ago

This is just how the system works: it is a pyramid, and people who happen to be on top earn more, despite any value he or she can bring to the table. There is of course some relation between value and position in this pyramid (particularly true near the bottom of it), but this is definitely not always true. As for the choice of this structure, well, today everyone expects a pyramid structure, and I believe there is no indication of change (I might be wrong on that). It is surely not a perfect system given most definitions of "meritocracy", but I believe it is the best we can do now.

a3voices 11y ago

Because they don't take new jobs unless they're given large raises.

vlehto 11y ago

CEO can't really improve a company that much. (CEOs typically don't have any part in the actual production. And very small part in sales.) But CEO can fuck up big time. If you would hire CEO with low pay, you have to choose inexperienced CEO. So you have no track record. And the chance that you have fuck-up is relatively high. CEO's are paid a lot to "guarantee" that they are not idiots. Because accidentally hiring an idiot would be absolutely devastating. In other words: The CEO holds the company as a hostage, and you pay him to remain insignificant.