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The same could be said for any other employees. Programmers, warehouse workers or whatever. Maybe they could be paid for the difference they make too. Yet th

by pitay 11y ago

The same could be said for any other employees. Programmers, warehouse workers or whatever. Maybe they could be paid for the difference they make too. Yet this doesn't happen, because the supply side is important as well, as well as the lack of power these people have. From what I see, finding the right guy to manage a company is very hit and miss in the real world. Just look at Ron Johnson. He was previously senior vice president of retail operations at Apple, and then hired as CEO of J.C. Penny. He was fired as CEO from J.C. Penny in 2013, after retail sales were down by 32% and stock prices fell steeply. This was despite him having a very successful tenure at Apple. The pricing should factor in the uncertainty and risk of the performance of someone in the position of CEO. I have probably have not touched most of things that could be issues here, such as corruption, and that some CEOs are just extremely incompetent. I remember a CEO that was given 250 million dollars to leave because he had that much negative impact on the company he was running. This was someone that the board thought was a great hire. Anyway, I find the post I am replying to is way too simplistic and looks at CEOs with extremely rose coloured glasses. There is a lot more to consider.

blfr 11y ago
The same could be said for any other employees. Programmers, warehouse workers or whatever. Some programmers, maybe, but very few could move large company's revenue by 10%. And almost certainly no one moving physical stuff around in a warehouse could.
- falcolas 11y ago
  > no one moving physical stuff around in a warehouse could [move large company's revenue by 10%] Sure they could. They're the feet on the ground, so to say, and so they have the best insight into inefficiencies which are occurring on a day-to-day basis. You can bet it wasn't a CEO who discovered UPS' "only make right turns" trick. Or Bezos who optimized Amazon's warehouses. A 10% reduction in costs is very realistic for these kinds of finds, and those reduction in costs are worth more than a 10% increase in revenue.
- pitay 11y ago
  I was referring to the amount of money the employee makes for the company. Does the employee get near what they make the company? I doubt it. Does the company need to pay the employee near what they make the company? No. So a company does not need to pay the CEO the difference that they supposedly make the company. They just need to pay what someone will accept to do a similar job (I am not saying worse in any way), just like other employees.
yummyfajitas 11y ago
The same could be said for any other employees. Programmers, warehouse workers or whatever. Maybe they could be paid for the difference they make too. Yet this doesn't happen, because the supply side is important as well, as well as the lack of power these people have. No, this can't be said for every other employee. The best warehouse worker is not adding $1B or anything close to it to the bottom line. It can be said for some programmers and these programmers do tend to make lots of money. (Though in many cases they are given titles other than "programmer", e.g. "managing director" of a team of 0.) See also top traders - at many firms they can make more than the CEO. The fact that not all CEOs are perfect doesn't contradict this claim. In fact, if you are attributing JC Penny's 32% loss to the CEO you are supporting the claim of gizi.
- pitay 11y ago
  If you read the paragraph which you say I am attributing 'attributing JC Penny's 32% loss to the CEO' then you will find that I was talking about it being unpredictable when a new CEO is hired, he had a good track record at apple before he ballsed it up at J.C. Penny by not taking into account that the customer demographic was different, he just went with the one thing that worked for him before. And no, what I said doesn't support the claim of Gizi because showing someone can destroy or damage a company does not show they can run one excellently, or that a high paid CEO will run one better than someone who is willing to work that job for substantially less. Here is an article that shows that higher pay only increases performance until a point, then performance drops: http://eganassociates.com.au/high-ceo-pay-inspires-better-performance-until-it-doesnt/ http://eganassociates.com.au/high-ceo-pay-inspires-better-pe... These results came from data that compared CEO remuneration to average employee remuneration. This directly contradicts what Gizi was proposing, because the real world data shows a negative correlation between CEO pay and performance after a point. The full paper is available here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2529112 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2529112 if anyone is interested in it. Consider the GFC, it shows how well upper management really stuffed things up at the largest companies and still got away with it, no problems, still getting huge payouts for sub par leadership. Yet when things go well, the CEO gets bonuses for things that may have had nothing to do with them. Random fluctuations are wrongfully attributed to CEOs, and they get hefty bonuses for it as well. Here is a study that shows this http://www.sciencedaily.com/releases/2015/10/151022192337.htm http://www.sciencedaily.com/releases/2015/10/151022192337.ht... , unfortunately the original source is behind a paywall so I am not linking it.
sokoloff 11y ago
> The pricing should factor in the uncertainty and risk of the performance of someone in the position of CEO. This is what options/share-based compensation seeks to do in large part. Still, when those packages pay off, people get all kinds of jealous butt-hurt over that as well...

by pitay 11y ago

blfr 11y ago

The same could be said for any other employees. Programmers, warehouse workers or whatever. Some programmers, maybe, but very few could move large company's revenue by 10%. And almost certainly no one moving physical stuff around in a warehouse could.

falcolas 11y ago
> no one moving physical stuff around in a warehouse could [move large company's revenue by 10%] Sure they could. They're the feet on the ground, so to say, and so they have the best insight into inefficiencies which are occurring on a day-to-day basis. You can bet it wasn't a CEO who discovered UPS' "only make right turns" trick. Or Bezos who optimized Amazon's warehouses. A 10% reduction in costs is very realistic for these kinds of finds, and those reduction in costs are worth more than a 10% increase in revenue.
pitay 11y ago
I was referring to the amount of money the employee makes for the company. Does the employee get near what they make the company? I doubt it. Does the company need to pay the employee near what they make the company? No. So a company does not need to pay the CEO the difference that they supposedly make the company. They just need to pay what someone will accept to do a similar job (I am not saying worse in any way), just like other employees.

yummyfajitas 11y ago

pitay 11y ago
If you read the paragraph which you say I am attributing 'attributing JC Penny's 32% loss to the CEO' then you will find that I was talking about it being unpredictable when a new CEO is hired, he had a good track record at apple before he ballsed it up at J.C. Penny by not taking into account that the customer demographic was different, he just went with the one thing that worked for him before. And no, what I said doesn't support the claim of Gizi because showing someone can destroy or damage a company does not show they can run one excellently, or that a high paid CEO will run one better than someone who is willing to work that job for substantially less. Here is an article that shows that higher pay only increases performance until a point, then performance drops: http://eganassociates.com.au/high-ceo-pay-inspires-better-performance-until-it-doesnt/ http://eganassociates.com.au/high-ceo-pay-inspires-better-pe... These results came from data that compared CEO remuneration to average employee remuneration. This directly contradicts what Gizi was proposing, because the real world data shows a negative correlation between CEO pay and performance after a point. The full paper is available here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2529112 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2529112 if anyone is interested in it. Consider the GFC, it shows how well upper management really stuffed things up at the largest companies and still got away with it, no problems, still getting huge payouts for sub par leadership. Yet when things go well, the CEO gets bonuses for things that may have had nothing to do with them. Random fluctuations are wrongfully attributed to CEOs, and they get hefty bonuses for it as well. Here is a study that shows this http://www.sciencedaily.com/releases/2015/10/151022192337.htm http://www.sciencedaily.com/releases/2015/10/151022192337.ht... , unfortunately the original source is behind a paywall so I am not linking it.

sokoloff 11y ago

> The pricing should factor in the uncertainty and risk of the performance of someone in the position of CEO. This is what options/share-based compensation seeks to do in large part. Still, when those packages pay off, people get all kinds of jealous butt-hurt over that as well...