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I'm curious - is it common to hire CEOs and then compensate them with a commission of their negotiated savings? I'm sure that the devil is in the details, but
by MikeTheGreat 10y ago
I'm curious - is it common to hire CEOs and then compensate them with a commission of their negotiated savings?
I'm sure that the devil is in the details, but for a company that is already up-and-running it seems like it should be possible to measure how much the company is spending currently, then how much less the company spent after the CEO negotiated, and then give the CEO a fraction of that.
- argv_empty 10y agoThat seems like what stock compensation is aimed at. If the company gets a better deal on something, it retains more of its assets and is thus worth more to its owners.
- MikeTheGreat 10y agoYeah, but the stock price is affected by too many factors to make the argument that it's a good proxy for any one thing. Certainly, the stock value isn't going to rise or fall appreciably for most of the deals that the CEO will negotiate - it would have to be big enough to 'make the news' and/or show up in a press release, at a minimum. I feel like I've heard the argument that "CEOs negotiate great deals and that helps to justify their compensation" before, but I've never heard of anyone actually basing a compensation schema on that directly. Given that we live an an Era Of Data I'd expect companies to be doing this (or trying to do this).
- lmm 10y agoThe stock price is what the investors value; they want the CEO to increase it by whatever means. Any other incentive structure would presumably lead the stock price to fall, or rise less, which wouldn't be what they want.