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Every sane CEO realizes that even if they're really good there's still an element of chance. At the very least, you'd have to make the expected value of their
by morgante 11y ago
Every sane CEO realizes that even if they're really good there's still an element of chance.
At the very least, you'd have to make the expected value of their compensation greater than it is today. So if they succeed they get an extra $60 million but if they fail they lose $50 million (with a baseline of $51 million). Then you would incentivize risk-taking CEOs.
Of course, that's not actually far off from what we have today: CEOs receive a majority of the compensation in stock, which does have risk. Maybe it would make sense to set the strike prices much more aggressively instead though.