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I think professional athletes make an interesting parallel with CEOs. The majority of athletes are unarguably the absolute best in the world at what they do. S

I think professional athletes make an interesting parallel with CEOs. The majority of athletes are unarguably the absolute best in the world at what they do. Superstars have a far bigger impact on their team's performance than an average player in the league. Many commenters have argued that good CEOs have large impacts on company performance. The average NFL career is 3.5 years; the average NBA career is 4.8 years. Several commenters have pointed out that CEOs of failing companies risk this being their last CEO job. Athletes are derided if they cannot save enough to ensure their retirement when they are making millions of dollars a year. Why can't we expect CEOs to manage their own finances responsibly and plan for a future where they aren't earning millions? After their playing careers, many athletes choose to work lower paying jobs as assistants, coaches, commentators, consultants, etc. Why can't a CEO take a step back after a failure and be a COO, CMO, VP of Sales, etc.? During their careers, NFL and NBA players' earnings are limited by a salary cap. LeBron James can't earn more than ~$30MM from his playing contract, even though he generates far more revenue in TV contracts, jersey sales, gate receipts, etc. Why can't we impose salary caps on CEOs?

moduspwnens14 10y ago
We can impose salary caps--it just means that the people who are really good at this stuff will play in a different league. If there were another NBA where LeBron would make 10x his salary, he'd play in it. All the best players would. And then that league would be more successful. Now instead of "league" and "LeBron," substitute in "country" and "the world's best corporate executives" and you'll see why it's a bad idea. We want the world's best here.
- BrandonM 10y ago
  There are other professional basketball leagues that don't have salary caps, and LeBron doesn't play for them. The NBA salary cap is close to or exceeds what he could make in other leagues. Additionally, playing for the NBA gives him greater exposure to the American market. Do you have any countries in mind that are going to pay executives more per year than the US, even with a salary cap? My understanding is that the US is already so far above the rest of the world that it would have to come way down to lose out on a raw compensation basis. IMO, a cap would mostly serve to rein in the well-networked, measurable-performance-leveraging aspects of CEO compensation. Compared to every other employee, CEOs have a far greater ability to extract money from a company, mostly independent of their contributions to that company. Is it any surprise, then, that they leverage that ability to earn far more than their coworkers?

moduspwnens14 10y ago

We can impose salary caps--it just means that the people who are really good at this stuff will play in a different league. If there were another NBA where LeBron would make 10x his salary, he'd play in it. All the best players would. And then that league would be more successful. Now instead of "league" and "LeBron," substitute in "country" and "the world's best corporate executives" and you'll see why it's a bad idea. We want the world's best here.

BrandonM 10y ago
There are other professional basketball leagues that don't have salary caps, and LeBron doesn't play for them. The NBA salary cap is close to or exceeds what he could make in other leagues. Additionally, playing for the NBA gives him greater exposure to the American market. Do you have any countries in mind that are going to pay executives more per year than the US, even with a salary cap? My understanding is that the US is already so far above the rest of the world that it would have to come way down to lose out on a raw compensation basis. IMO, a cap would mostly serve to rein in the well-networked, measurable-performance-leveraging aspects of CEO compensation. Compared to every other employee, CEOs have a far greater ability to extract money from a company, mostly independent of their contributions to that company. Is it any surprise, then, that they leverage that ability to earn far more than their coworkers?