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Iirc studies have shown very little correlation between executive compensation and company productivity/profitability. The CEO is worth more than the typical j

Iirc studies have shown very little correlation between executive compensation and company productivity/profitability. The CEO is worth more than the typical janitor or manual laborer, you’d be pretty hard pressed to prove otherwise. But the current compensation scheme seems to be way out of wack with what each employee actually brings to the table.

zimablue 8y ago
I think this study has the same problem as the argument that hedge funds are a waste of time because hedge funds don't make money on average. Imaging the average return of hedge funds was 50%, what would happen? people would open up more and more less and less competent hedge funds until it was a flat return and no longer attractive. You're measuring the results post (arguably) a market force which has impacted the results. If paying managers more than the current average showed obvious results, the average would go up. You also have correlation/causation. I'm not sure if i'm pro bosses mental pay or whether I think it makes any difference just don't buy this argument/study.
- jimbokun 8y ago
  "I think this study has the same problem as the argument that hedge funds are a waste of time because hedge funds don't make money on average." Maybe they are a waste of time, on average?
  - zimablue 8y ago
    Not making money on average like I'm trying to say is a true but meaningless statement. But there's a difference between the statement: "I can't make money on average by putting money into this system (this system isn't undervalued)" and "This system is worthless" which is kind of conflated. Like the system will always expand to the point that there's no free cash on the table, so looking at it and saying "on average paying more for CEOs or putting money into a random hedge fund doesn't move the dial" has no bearing on whether executive pay being high or hedge funds existing is keeping money off the table (if they were smaller/lower there would be gain to expanding). The gradient at the equilibrium is always zero, "We found that paying developers more or less doesn't impact the average success of a firm". Yeah because there's an equilibrium where the firms/market has decided roughly what a developer costs, and everyone is paid close to that. That's not an argument that developer pay should be wildly less, because if the average was moved to "developers make $10k per year" than at THAT point, far from the equilibrium, you'd see a big gradient that firms who paid developers more (ergo probably got better devs) did far better.
mmsimanga 8y ago
To add. I am always amazed at how often top levels get fired and life just goes on. Every time one of those emails goes out to all staff saying so and so has decided to pursue other interests in life is actually code for so and so got kicked out of the high earnings club. I do think capitalism is the best of the whole lot but the hyperbole used to justify executive earnings is something that the world needs to focus on. We have created such complex systems such that no one person can really claim to be the reason things succeed or fail
- l9k 8y ago
  > so and so got kicked out of the high earnings club ... Usually to join another high earnings club
  - village-idiot 8y ago
    One of the more interesting books I’d read was “Dream Hoarders”, which is about the top 20% setting up a system that prevents them or their children from ever leaving this top quintile. College in particular does more to protect low competency rich kids than it does to promote high competency poor kids, sadly. As a tidbit from the book, most of the top 1% are actually a rotating cast of the top 20% having a good year (the ultra rich like the Kochs excepted). Most of the top quintile will get a year or two in the top 1% in their lifetimes. But once you focus on the top 20%, you start seeing a very stable clique that’s holding onto power.

zimablue 8y ago

I think this study has the same problem as the argument that hedge funds are a waste of time because hedge funds don't make money on average. Imaging the average return of hedge funds was 50%, what would happen? people would open up more and more less and less competent hedge funds until it was a flat return and no longer attractive. You're measuring the results post (arguably) a market force which has impacted the results. If paying managers more than the current average showed obvious results, the average would go up. You also have correlation/causation. I'm not sure if i'm pro bosses mental pay or whether I think it makes any difference just don't buy this argument/study.

jimbokun 8y ago
"I think this study has the same problem as the argument that hedge funds are a waste of time because hedge funds don't make money on average." Maybe they are a waste of time, on average?
- zimablue 8y ago
  Not making money on average like I'm trying to say is a true but meaningless statement. But there's a difference between the statement: "I can't make money on average by putting money into this system (this system isn't undervalued)" and "This system is worthless" which is kind of conflated. Like the system will always expand to the point that there's no free cash on the table, so looking at it and saying "on average paying more for CEOs or putting money into a random hedge fund doesn't move the dial" has no bearing on whether executive pay being high or hedge funds existing is keeping money off the table (if they were smaller/lower there would be gain to expanding). The gradient at the equilibrium is always zero, "We found that paying developers more or less doesn't impact the average success of a firm". Yeah because there's an equilibrium where the firms/market has decided roughly what a developer costs, and everyone is paid close to that. That's not an argument that developer pay should be wildly less, because if the average was moved to "developers make $10k per year" than at THAT point, far from the equilibrium, you'd see a big gradient that firms who paid developers more (ergo probably got better devs) did far better.

mmsimanga 8y ago

To add. I am always amazed at how often top levels get fired and life just goes on. Every time one of those emails goes out to all staff saying so and so has decided to pursue other interests in life is actually code for so and so got kicked out of the high earnings club. I do think capitalism is the best of the whole lot but the hyperbole used to justify executive earnings is something that the world needs to focus on. We have created such complex systems such that no one person can really claim to be the reason things succeed or fail

l9k 8y ago
> so and so got kicked out of the high earnings club ... Usually to join another high earnings club
- village-idiot 8y ago
  One of the more interesting books I’d read was “Dream Hoarders”, which is about the top 20% setting up a system that prevents them or their children from ever leaving this top quintile. College in particular does more to protect low competency rich kids than it does to promote high competency poor kids, sadly. As a tidbit from the book, most of the top 1% are actually a rotating cast of the top 20% having a good year (the ultra rich like the Kochs excepted). Most of the top quintile will get a year or two in the top 1% in their lifetimes. But once you focus on the top 20%, you start seeing a very stable clique that’s holding onto power.