7 ms·

> Ask yourself if your CEO is really working 100x as hard as you, or 100x smarter than you. That's distorting what shareholders look for in a CEO. Let's say y

by peeters 10y ago

> Ask yourself if your CEO is really working 100x as hard as you, or 100x smarter than you. That's distorting what shareholders look for in a CEO. Let's say you have two CEO candidates, one you can hire for $100,000 (A) and another for $10 million (B). Share holders would be stupid to ask themselves if B can make 100x the profits of A. They would be asking themselves if B can make at least $9,900,000 more revenue than A. If it's a billion dollar company doing ~$100 million in sales per quarter, that's not that unreasonable to expect from a CEO. It's expecting the CEO to raise revenue by ~2.5%, not 10,000%.

brianwawok 10y ago
And the obvious developer question is: If developer A can increase the value of your product by 1 million dollars, but developer B can only increase the value of your product by 100k.. why isn't developer A worth 900k (or at least 500k) more than developer B? The big challenge is measurability. Stock price going up is easy. Profits going up is easy. An app being 1 million dollars better? No idea what that even means.
- peeters 10y ago
  Yep, and then the follow up is just as difficult...is this dev not delivering value because she's not a good dev, or because those above her aren't giving her opportunities in high value projects?
  - brianwawok 10y ago
    "Am I a bad CEO or does my company just stink"
    - marcosdumay 10y ago
      Who is the one person in charge of making the company not stink?
      - Uhhrrr 10y ago
        It's true that they could theoretically fire everyone, but practically speaking? They inherit the employees, culture, customers, vendors, and physical plant. It's (remotely) possible that Marissa Meyer is the world's best CEO, but she chose to play against a stacked deck when she went to Yahoo.
        throwaway_xx9 10y ago
        No, paying $1.1 billion for Tumblr, a bankrupt company with a 20-something founder, then not monetizing it, makes Meyer one of the worst CEOs in corporate history.
        marcosdumay 10y ago
        Every new CEO in a big company seems to decimate the employees anyway. Why none fires the right 10%? Yes, you have a point, but getting on a failing company and failing does not reflect as bad as succeeding on such a company would look good. The only negative contribution Yahoo gave to Marissa Meyer CV was that badly managed data leak that is making every news.
- kamaal 10y ago
  In some cases, but in many cases its easy to see who is contributing above whom. The problem really is at the level of a programmer politics is at play, given a whole lot of more number of people fight for fewer resources.
- sbov 10y ago
  Assuming you can even measure this. How do you arbitrarily assign value produced by a dev vs produced by marketing vs produced by company synergies (could the dev really create 1 million in value without all those other people?). I've long felt that the best devs should be building tools for other devs. The lower in the product pipeline the better, because that's where they can affect the most people, but it seems impossible to measure when you're talking about hard numbers. E.g. in a large enough organization, if a good dev can make all your other devs even 1% more efficient, the value they just created will blow that $1 million figure out of the water. That dev producing "$1 million dollars in value" for your product owes much of that value to the devs that are creating tools for them to use, among other things.
  - dikdik 10y ago
    The same line of thought can be put to CEOs. How do we know a CEO was responsible for a big bump in stock prices? Maybe the marketing team hit gold this year, the developers/engineers put out something truly game changing, or the entire market is just on an upswing and the company is doing better in spite of itself.
mpdehaan2 10y ago
Sure, that's what share holders do. It's however not EQUITABLE. To slowly change this over time, we have to work at it, by ensuring fair compensation at companies we start and for our employees. This can change - it's not a statement of the present - the status quo is pretty bad - but a desire for the future. To get there, we have to start expressing value for where creation comes from.
fsloth 10y ago
But the problem is from point of view of compensation fairness that was the CEO who got paid 10M 2.5% better than the less paid CEO or was he just lucky (great personnel, good market, etc). A CEO cannot function without a company. Yes, a bad CEO can wreck a company really fast. I would claim there are no superhuman CEO:s who can outperform a market (there are CEO:s who have disrupted markets, sure but that is an exception and not a rule) by themselves - but, there are CEO:s who can wreck companies with a single misplaced stroke. Are they paid not to screw up? The main problem of high-comp CEO:s IMO is that this view of a lord over his domain diminishes the value of the other personnel in the company. Teamwork and all that. If there are really good statistics then yes, a single person can make a huge difference ala moneyball. But does an average Fortune 500 have such statistics?
- ssalazar 10y ago
  > Are they paid not to screw up? Thats an interesting insight; there isn't anything inherently wrong with this. DevOps and security are two critical technical roles that work similarly: if they're doing their job right, the machine continues to run perfectly.
athenot 10y ago
This exactly. A CEO is an asset/resource just like anything else in the company. It has a cost and a ROI. Technically, any employee is like that too, except that when the position holds so much scrutiny, the ROI is analysed in greater depth. It may be unfair at a human level but is completely rational from an accounting perspective. This is part of a larger pattern in capitalist systems: you want to position yourself within the major flows of money. CEOs may be the more obvious positions but other occupations such as software engineers or salespeople are in a similar position of enabling that flow of money.
- jimbokun 10y ago
  "Technically, any employee is like that too, except that when the position holds so much scrutiny, the ROI is analysed in greater depth." The point of the article is this flatly false. Almost all of the "ROI" attributed to executive skill is actually due to luck.
  - athenot 10y ago
    I guess the point is that it is the ROI calculations that don't differentiate between the skill or the market conditions.
  - cmdrfred 10y ago
    Luck is a bad term here, Luck to me seems to imply something that surrounds the person. A force of nature. This is straight up random chance.
- SomeStupidPoint 10y ago
  > except that when the position holds so much scrutiny, the ROI is analysed in greater depth. It may be unfair at a human level but is completely rational from an accounting perspective The problem is that the position has an amount of "scrutiny" that is improper from an accounting perspective (...the point of the article...), but comes from the social status of the people holding the role. Of course, it's not actually accounting scrutiny at all that's the difference here (because if it were, even minimal scrutiny would reveal the error), but rather the social position of the people, and thus their access to influence of decisions. Your argument is nothing but trying to guise an unsupported position about the relative importance of social classes in the terminology of economics, even though your economic arguments are baseless and wrong (in terms of their economic merit). This is part of a wider trend in the US to eliminate class consciousness and the social duty of the upper classes to the lower, and perhaps you're merely repeating those arguments without having really analyzed what they're saying. Your point about the larger pattern in capitalist systems is correct: capture of market execution is sufficient for market corruption, but can be difficult to prove after the fact. This is the general strategy of the ruling class to control the lower classes in the US.
carsongross 10y ago
Share holders rarely have any influence. It's the board, and the board is made of elites who are in the same social class as the CEO. Both conspire against the shareholders, in a variation of the public choice special interest problem. The beatings will continue until dividends are deductible to the company and are taxed the same way capital gains are for the individual.
- cmdrfred 10y ago
  This is the part the people miss, they all "work" on each others boards. It is a you scratch my back, I'll scratch yours deal.
- drakonandor 10y ago
  Rarely any influence? Interesting theory, except, shareholders can, you know, fire and hire the board members at will.
  - hyperpape 10y ago
    The fact that "activist shareholders" is a term that people have to use suggests that shareholders rarely do that.
    - drakonandor 10y ago
      Perhaps because, they're largely happy with the terms of there arrangement?
      - dvtv75 10y ago
        You should probably stop making assumptions as to why people do (or do not) make a choice. Ideological rationalization on your part does not create motivation for someone else.
  - carsongross 10y ago
    That's hysterically naive or extremely disingenuous.

by peeters 10y ago

brianwawok 10y ago

And the obvious developer question is: If developer A can increase the value of your product by 1 million dollars, but developer B can only increase the value of your product by 100k.. why isn't developer A worth 900k (or at least 500k) more than developer B? The big challenge is measurability. Stock price going up is easy. Profits going up is easy. An app being 1 million dollars better? No idea what that even means.

peeters 10y ago
Yep, and then the follow up is just as difficult...is this dev not delivering value because she's not a good dev, or because those above her aren't giving her opportunities in high value projects?
- brianwawok 10y ago
  "Am I a bad CEO or does my company just stink"
  - marcosdumay 10y ago
    Who is the one person in charge of making the company not stink?
    - Uhhrrr 10y ago
      It's true that they could theoretically fire everyone, but practically speaking? They inherit the employees, culture, customers, vendors, and physical plant. It's (remotely) possible that Marissa Meyer is the world's best CEO, but she chose to play against a stacked deck when she went to Yahoo.
      - throwaway_xx9 10y ago
        No, paying $1.1 billion for Tumblr, a bankrupt company with a 20-something founder, then not monetizing it, makes Meyer one of the worst CEOs in corporate history.
      - marcosdumay 10y ago
        Every new CEO in a big company seems to decimate the employees anyway. Why none fires the right 10%? Yes, you have a point, but getting on a failing company and failing does not reflect as bad as succeeding on such a company would look good. The only negative contribution Yahoo gave to Marissa Meyer CV was that badly managed data leak that is making every news.
kamaal 10y ago
In some cases, but in many cases its easy to see who is contributing above whom. The problem really is at the level of a programmer politics is at play, given a whole lot of more number of people fight for fewer resources.
sbov 10y ago
Assuming you can even measure this. How do you arbitrarily assign value produced by a dev vs produced by marketing vs produced by company synergies (could the dev really create 1 million in value without all those other people?). I've long felt that the best devs should be building tools for other devs. The lower in the product pipeline the better, because that's where they can affect the most people, but it seems impossible to measure when you're talking about hard numbers. E.g. in a large enough organization, if a good dev can make all your other devs even 1% more efficient, the value they just created will blow that $1 million figure out of the water. That dev producing "$1 million dollars in value" for your product owes much of that value to the devs that are creating tools for them to use, among other things.
- dikdik 10y ago
  The same line of thought can be put to CEOs. How do we know a CEO was responsible for a big bump in stock prices? Maybe the marketing team hit gold this year, the developers/engineers put out something truly game changing, or the entire market is just on an upswing and the company is doing better in spite of itself.

mpdehaan2 10y ago

Sure, that's what share holders do. It's however not EQUITABLE. To slowly change this over time, we have to work at it, by ensuring fair compensation at companies we start and for our employees. This can change - it's not a statement of the present - the status quo is pretty bad - but a desire for the future. To get there, we have to start expressing value for where creation comes from.

fsloth 10y ago

But the problem is from point of view of compensation fairness that was the CEO who got paid 10M 2.5% better than the less paid CEO or was he just lucky (great personnel, good market, etc). A CEO cannot function without a company. Yes, a bad CEO can wreck a company really fast. I would claim there are no superhuman CEO:s who can outperform a market (there are CEO:s who have disrupted markets, sure but that is an exception and not a rule) by themselves - but, there are CEO:s who can wreck companies with a single misplaced stroke. Are they paid not to screw up? The main problem of high-comp CEO:s IMO is that this view of a lord over his domain diminishes the value of the other personnel in the company. Teamwork and all that. If there are really good statistics then yes, a single person can make a huge difference ala moneyball. But does an average Fortune 500 have such statistics?

ssalazar 10y ago
> Are they paid not to screw up? Thats an interesting insight; there isn't anything inherently wrong with this. DevOps and security are two critical technical roles that work similarly: if they're doing their job right, the machine continues to run perfectly.

athenot 10y ago

This exactly. A CEO is an asset/resource just like anything else in the company. It has a cost and a ROI. Technically, any employee is like that too, except that when the position holds so much scrutiny, the ROI is analysed in greater depth. It may be unfair at a human level but is completely rational from an accounting perspective. This is part of a larger pattern in capitalist systems: you want to position yourself within the major flows of money. CEOs may be the more obvious positions but other occupations such as software engineers or salespeople are in a similar position of enabling that flow of money.

jimbokun 10y ago
"Technically, any employee is like that too, except that when the position holds so much scrutiny, the ROI is analysed in greater depth." The point of the article is this flatly false. Almost all of the "ROI" attributed to executive skill is actually due to luck.
- athenot 10y ago
  I guess the point is that it is the ROI calculations that don't differentiate between the skill or the market conditions.
- cmdrfred 10y ago
  Luck is a bad term here, Luck to me seems to imply something that surrounds the person. A force of nature. This is straight up random chance.
SomeStupidPoint 10y ago
> except that when the position holds so much scrutiny, the ROI is analysed in greater depth. It may be unfair at a human level but is completely rational from an accounting perspective The problem is that the position has an amount of "scrutiny" that is improper from an accounting perspective (...the point of the article...), but comes from the social status of the people holding the role. Of course, it's not actually accounting scrutiny at all that's the difference here (because if it were, even minimal scrutiny would reveal the error), but rather the social position of the people, and thus their access to influence of decisions. Your argument is nothing but trying to guise an unsupported position about the relative importance of social classes in the terminology of economics, even though your economic arguments are baseless and wrong (in terms of their economic merit). This is part of a wider trend in the US to eliminate class consciousness and the social duty of the upper classes to the lower, and perhaps you're merely repeating those arguments without having really analyzed what they're saying. Your point about the larger pattern in capitalist systems is correct: capture of market execution is sufficient for market corruption, but can be difficult to prove after the fact. This is the general strategy of the ruling class to control the lower classes in the US.

carsongross 10y ago

Share holders rarely have any influence. It's the board, and the board is made of elites who are in the same social class as the CEO. Both conspire against the shareholders, in a variation of the public choice special interest problem. The beatings will continue until dividends are deductible to the company and are taxed the same way capital gains are for the individual.

cmdrfred 10y ago
This is the part the people miss, they all "work" on each others boards. It is a you scratch my back, I'll scratch yours deal.
drakonandor 10y ago
Rarely any influence? Interesting theory, except, shareholders can, you know, fire and hire the board members at will.
- hyperpape 10y ago
  The fact that "activist shareholders" is a term that people have to use suggests that shareholders rarely do that.
  - drakonandor 10y ago
    Perhaps because, they're largely happy with the terms of there arrangement?
    - dvtv75 10y ago
      You should probably stop making assumptions as to why people do (or do not) make a choice. Ideological rationalization on your part does not create motivation for someone else.
- carsongross 10y ago
  That's hysterically naive or extremely disingenuous.