7 ms·

"A board of three is ideal. Your board should never exceed five people, unless your company is publicly held. (Government regulations effectively mandate that p

"A board of three is ideal. Your board should never exceed five people, unless your company is publicly held. (Government regulations effectively mandate that public companies have larger boards—the average is nine members.) By far the worst you can do is to make your board extra large. When unsavvy observers see a nonprofit organization with dozens of people on its board, they think: “Look how many great people are committed to this organization! It must be extremely well run.” Actually, a huge board will exercise no effective oversight at all; it merely provides cover for whatever microdictator actually runs the organization. If you want that kind of free rein from your board, blow it up to giant size. If you want an effective board, keep it small." — Peter Thiel More board members may increase intransigence, decrease oversight (cover over who is really making the decisions and who is not), and turn US corps more bureaucratic. Many totally rational worker ideals (keep comfy job) are often very opposed to a company's ideals (upgrade technology, take new risks, automate) that may disrupt current workers in favor of fewer workers or different workers. Boards beholden to current workers may sacrifice a lot of progress to keep things comfy, at the expense of future workers and jobs. I get why, as this article describes, it happens in Germany and is suggested for the US. But on the face of it that mandating board composition is probably not the best way to help workers in companies. There is probably some better way that throws less sand into gears, that involves fewer attempts to mortgage the future of a company for its present workers, etc. Obviously it "works" in germany, for some amount of "works," but it should need no explanation that US companies as a whole are able to move faster, and in high tech, often with higher wages(!!) than in Germany. Sorry that my perspective is dragging this in a tech centric, but everyone should ask themselves: Why are tech workers wages so low in Germany compared to the USA, if they have workers on the board? It seems unaddressed in this discussion so far, which I think is a great discussion to have. But lots of people so far are acting like its obvious that the German model will lead to higher worker salaries but its... not true already in Germany, for tech at least.

thrill 8y ago
IME, Peter is spot on. The most ineffective board I ever sat on was a charter school board. There was so much representation present that nothing could get decided in the time allotted. This was, in retrospect, perfectly optimized by the administration of the time - they did whatever they wanted, and unless it really upset a large number of people, nothing changed.
- simonsarris 8y ago
  Yeah everyone should serve on a board or just a committee (there are plenty in your town I promise) to see what this looks like. My town had a downtown improvement committee of 3 people which seemed successful, so to further expand its "power" they decided to add dozens of people to it (I was one of the ones added). What I saw was eye-opening.
  - ajdlinux 8y ago
    I served on a student club committee as an undergrad, where at one point we had over 20 representatives, which made it hard to even make quorum consistently. What effectively happened was that a small group of us with executive positions were the ones who actually ran the society, and we had our own meetings where we nailed down plans then presented it to the wider group as essentially a fait accompli. Everything was far saner after we passed new regulations to force it down to a mere 11 people...
balabaster 8y ago
It's not just Germany that has lower tech wages. I've looked at moving back home to the UK many times so that I can spend more time with my family, but can't reconcile the fact that I'd have to take a 75-80% pay cut to stay in this industry. Compared to North America, software engineers are paid pittance in the UK... now that you've brought my attention to the fact it's the same in Germany, it begs me to ask the question - is this the same in all of Europe?
- NikolaNovak 8y ago
  >> Compared to North America, software engineers are paid pittance I'm not certain it's North America as a whole. I'm in Toronto, mostly considered the highest paid city in Canada, and I've long decided to not pay attention to Silicon Valley salaries, lest I get depressed :) Whether you search for developer, software engineer, system administrator, SRE or the like, salaries in California seem positively extravagant to those in Toronto (which also has a very high baseline cost of living). Further, I'm pretty sure Mexico salaries are even further depressed (which is the third country composing "North America" :)
- bitwize 8y ago
  It's probably the same everywhere there's not a myth of programmers as rarefied hacker geniuses homesteading the tech frontier, as well as enough VC funding sloshing around to pay those rockstar ninjas the SV-tier salaries they demand. Most programmers are maintenance tradesmen, and are paid accordingly.
- perneto 8y ago
  No. The UK has some of the worst tech wages in Europe, esp. on a cost-of-living adjusted basis. Switzerland is on par or better than the US. Other countries fall on a spectrum in between. FYI this isn't limited to Europe; Canada also pays much lower than the US. (The Seattle vs Vancouver comparison is especially striking). Elsewhere, Singapore is comparable to Switzerland and the US. I'm not sure about NZ and Australia.
  - ska 8y ago
    For that matter, the parts of the US that aren't the bay area, Seattle, NYC ... pay a lot less than the parts that are. The tech scene in Canada is much smaller, but pay seems similar to "the rest of US", for the most part. Perhaps a little better if you adjust for health care,etc. but I suspect it's a wash. So is this really a Canada [or wherever] vs. US comparison, or large US tech-hub vs. everywhere else comparison?
dnomad 8y ago
> More board members may increase intransigence, decrease oversight (cover over who is really making the decisions and who is not), and turn US corps more bureaucratic. Take a look at the evidence in the real world (y'know, actual facts, not baseless speculation) and you will find strong indication that larger board sizes increase corporate performance. > Boards beholden to current workers may sacrifice a lot of progress to keep things comfy, at the expense of future workers and jobs. Again, this is the sort of thing that you could investigate by doing research of actual facts in the real world. You might start by looking at how German firms with significant worker board representation responded to reunification and Eastern Europe online. Hint: workers did not sacrifice future growth to keep their "comfy" wages. > Obviously it "works" in germany, for some amount of "works," but it should need no explanation that US companies as a whole are able to move faster, and in high tech, often with higher wages(!!) than in Germany. Like most "economic debates" in the US, I expect the debate around codetermination will be driven purely by ideology. There will be no serious review of the existing economic research and zero attempt to seriously investigate what works and doesn't work in any countries. What you'll get is just one side crying "Communist!" and the other side crying "Capitalist!" and there will be zero progress.
- 6502nerdface 8y ago
  > Take a look at the evidence in the real world (y'know, actual facts, not baseless speculation) and you will find strong indication that larger board sizes increase corporate performance. So you have statistical evidence that an increase to board size on day t is associated with greater excess stock returns on days > t?
  - dnomad 8y ago
    Believe it or not you can actually look this up yourself. The impact of board size on corporate performance has been pretty thoroughly researched.
    - icebraining 8y ago
      Yes, it has: "One of the most consistent empirical relationships about boards of directors is that board size is negatively related to firm performance (Hermalin and Weisbach, 2003). Yermack (1996) finds a statistically significant negative relationship between board size and firm performance as measured by Tobin’s Q with a sample of 452 large U.S. industrial corporations for the period of 1984-1991. In the same study Yermack also exhibited that companies with small boards have more favorable values for financial ratios. Similarly Eisenberg, Sundgren and Wells (1998) concluded the negative relationship between firm board size and performance measured by return on assets (ROA) for a sample of 879 small private firms in Finland. In their 1998 study, Barhart and Rosenstein revealed that companies with fewer board members have superior performance compared to companies with crowded boards (...)" https://www.researchgate.net/publication/321869618_The_Effect_of_Board_Size_on_Firm_Performance_Evidence_from_Turkey https://www.researchgate.net/publication/321869618_The_Effec...
influx 8y ago
Not only are tech salaries lower, the tech in Germany is shockingly bad. The mechanical engineering is world class, but try to buy a ticket online for the amazing train system, and it feels like using an Airline website from the 90s.
- blahedo 8y ago
  You're kidding, right? Two years ago I visited Germany and was able to find and buy train tickets with options including various connections of long-distance trains, local transit, and walking (with statable preferences on how much walking and waiting was allowable), which included connections in random cities as short as five minutes (but which worked!), store it all on my phone, and show it to a conductor, who took it all in stride. (Although some apologetically asked to see the credit card I'd used to buy it because the shitty US credit system hadn't caught up with European state of the art.) It was a substantially better experience than I could get in most of the US at the time, although Amtrak has gotten better about not looking surprised when my ticket is on my phone, and some cities have moved in good directions there too.
  - JauntyHatAngle 8y ago
    Yeah not sure what he means. In Germany you can buy a train ticket using the app, show the QR code to the ticket inspector and he scans it. Done.
    - xioxox 8y ago
      It's not always so simple, as I found when I bought a "flexible" ticket from Germany to South Tyrol online. The ticket couldn't be printed, but had to be posted (an extra 4.50 euros!). It also wasn't possible to cancel online, but had to be posted back to the train company with a post mark dated before the date of travel. I tried to cancel it at the train station, but again this was not possible.
    - influx 8y ago
      Our group was six people, try buying six tickets online at once, and let me know how it goes :)
neves 8y ago
You'l need less if you live in a country that have public health care, good public schools, you can quickly travel by train to some of the greatest cities in the world, a vibrant cultural life, and one month vacations.
- chimeracoder 8y ago
  > You'l need less if you live in a country that have public health care, good public schools, you can quickly travel by train to some of the greatest cities in the world, a vibrant cultural life, and one month vacations. This is objectively not true, because the median American worker has a higher disposable income than the median worker in most of Europe, including Germany. This means that, even after paying for health insurance and out of pocket expenses, etc., Americans have higher purchasing power. The gap is even larger when you look at tech workers, because they're paid particularly well in the US compared to the general public.
  - robertAngst 8y ago
    This is a very good point that people often overlook. The US has insane disposable income from top down. Even our low income have luxuries. The problem with healthcare stems from corruption within out government.
  - AlexandrB 8y ago
    > This is objectively not true, because the median American worker has a higher disposable income than the median worker in most of Europe, including Germany. The gap disappears completely if you consider hours worked. Based on [1] and [2], the median German makes $19.52/hr in disposable income, while the median American makes $19.29/hr[3]. Given that Germany does better than the US on many health and education outcomes as well it must be doing something right. [1] https://en.wikipedia.org/wiki/Median_income#Median_equivalent_adult_income https://en.wikipedia.org/wiki/Median_income#Median_equivalen... [2] https://en.wikipedia.org/wiki/Working_time#Average_annual_hours_actually_worked_per_worker https://en.wikipedia.org/wiki/Working_time#Average_annual_ho... [3] Yes, I know the math is a little wonky, but I couldn't find median hours worked and had to settle for average. However, the distribution of hours worked is not as skewed as income given there's only a finite number of hours in a year.
jancsika 8y ago
Thiel's point is orthogonal to the point you are making. His point could just as easily be applied to an argument for the German system to have only three board members with one worker's representative member.
forapurpose 8y ago
> Many totally rational worker ideals (keep comfy job) are often very opposed to a company's ideals (upgrade technology, take new risks, automate) The premise trivializes worker's priorities and idealizes management's priorities. People's need for safety, money, job security, benefits, non-toxic environments, opportunity for advancement, reasonable hours and no off-the-clock work are not about 'comfy' - it's not a nicer office chair; these are their lives and careers; it's their kid's college tuition, their homes, and their health; it's their mental health and quality of life. Management also has plenty of self-interest and I don't find them so focused on efficiency. > Thiel He says plenty of outlandish things, and that quote fits his authoritarian bent. I don't take it at face value. Taking other people's ideas and priorities into account can be frustrating and it feels inefficient if you think you know everything. Too bad; that's your job as a leader.
kamaal 8y ago
There is also a phenomenon of 'diffusion of responsibility'. People think there are enough people to take care of the problems, and don't exactly have to intervene all the time.
pluma 8y ago
> Why are tech workers wages so low in Germany compared to the USA, if they have workers on the board? Because in Germany we have a lower cost of living compared to the tech hubs in the US. Also we have socialised welfare and healthcare systems. Additionally most Germany companies are more risk-averse and focus on long-term stability rather than massive growth. And on a more cynical note we also deregulated the labor market in the early 2000s to circumvent labor laws by outsourcing low-wage workers to temp agencies that are allowed to treat them like contractors without running afoul of laws intended to prevent this.

thrill 8y ago

IME, Peter is spot on. The most ineffective board I ever sat on was a charter school board. There was so much representation present that nothing could get decided in the time allotted. This was, in retrospect, perfectly optimized by the administration of the time - they did whatever they wanted, and unless it really upset a large number of people, nothing changed.

simonsarris 8y ago
Yeah everyone should serve on a board or just a committee (there are plenty in your town I promise) to see what this looks like. My town had a downtown improvement committee of 3 people which seemed successful, so to further expand its "power" they decided to add dozens of people to it (I was one of the ones added). What I saw was eye-opening.
- ajdlinux 8y ago
  I served on a student club committee as an undergrad, where at one point we had over 20 representatives, which made it hard to even make quorum consistently. What effectively happened was that a small group of us with executive positions were the ones who actually ran the society, and we had our own meetings where we nailed down plans then presented it to the wider group as essentially a fait accompli. Everything was far saner after we passed new regulations to force it down to a mere 11 people...

balabaster 8y ago

It's not just Germany that has lower tech wages. I've looked at moving back home to the UK many times so that I can spend more time with my family, but can't reconcile the fact that I'd have to take a 75-80% pay cut to stay in this industry. Compared to North America, software engineers are paid pittance in the UK... now that you've brought my attention to the fact it's the same in Germany, it begs me to ask the question - is this the same in all of Europe?

NikolaNovak 8y ago
>> Compared to North America, software engineers are paid pittance I'm not certain it's North America as a whole. I'm in Toronto, mostly considered the highest paid city in Canada, and I've long decided to not pay attention to Silicon Valley salaries, lest I get depressed :) Whether you search for developer, software engineer, system administrator, SRE or the like, salaries in California seem positively extravagant to those in Toronto (which also has a very high baseline cost of living). Further, I'm pretty sure Mexico salaries are even further depressed (which is the third country composing "North America" :)
bitwize 8y ago
It's probably the same everywhere there's not a myth of programmers as rarefied hacker geniuses homesteading the tech frontier, as well as enough VC funding sloshing around to pay those rockstar ninjas the SV-tier salaries they demand. Most programmers are maintenance tradesmen, and are paid accordingly.
perneto 8y ago
No. The UK has some of the worst tech wages in Europe, esp. on a cost-of-living adjusted basis. Switzerland is on par or better than the US. Other countries fall on a spectrum in between. FYI this isn't limited to Europe; Canada also pays much lower than the US. (The Seattle vs Vancouver comparison is especially striking). Elsewhere, Singapore is comparable to Switzerland and the US. I'm not sure about NZ and Australia.
- ska 8y ago
  For that matter, the parts of the US that aren't the bay area, Seattle, NYC ... pay a lot less than the parts that are. The tech scene in Canada is much smaller, but pay seems similar to "the rest of US", for the most part. Perhaps a little better if you adjust for health care,etc. but I suspect it's a wash. So is this really a Canada [or wherever] vs. US comparison, or large US tech-hub vs. everywhere else comparison?

dnomad 8y ago

> More board members may increase intransigence, decrease oversight (cover over who is really making the decisions and who is not), and turn US corps more bureaucratic. Take a look at the evidence in the real world (y'know, actual facts, not baseless speculation) and you will find strong indication that larger board sizes increase corporate performance. > Boards beholden to current workers may sacrifice a lot of progress to keep things comfy, at the expense of future workers and jobs. Again, this is the sort of thing that you could investigate by doing research of actual facts in the real world. You might start by looking at how German firms with significant worker board representation responded to reunification and Eastern Europe online. Hint: workers did not sacrifice future growth to keep their "comfy" wages. > Obviously it "works" in germany, for some amount of "works," but it should need no explanation that US companies as a whole are able to move faster, and in high tech, often with higher wages(!!) than in Germany. Like most "economic debates" in the US, I expect the debate around codetermination will be driven purely by ideology. There will be no serious review of the existing economic research and zero attempt to seriously investigate what works and doesn't work in any countries. What you'll get is just one side crying "Communist!" and the other side crying "Capitalist!" and there will be zero progress.

6502nerdface 8y ago
> Take a look at the evidence in the real world (y'know, actual facts, not baseless speculation) and you will find strong indication that larger board sizes increase corporate performance. So you have statistical evidence that an increase to board size on day t is associated with greater excess stock returns on days > t?
- dnomad 8y ago
  Believe it or not you can actually look this up yourself. The impact of board size on corporate performance has been pretty thoroughly researched.
  - icebraining 8y ago
    Yes, it has: "One of the most consistent empirical relationships about boards of directors is that board size is negatively related to firm performance (Hermalin and Weisbach, 2003). Yermack (1996) finds a statistically significant negative relationship between board size and firm performance as measured by Tobin’s Q with a sample of 452 large U.S. industrial corporations for the period of 1984-1991. In the same study Yermack also exhibited that companies with small boards have more favorable values for financial ratios. Similarly Eisenberg, Sundgren and Wells (1998) concluded the negative relationship between firm board size and performance measured by return on assets (ROA) for a sample of 879 small private firms in Finland. In their 1998 study, Barhart and Rosenstein revealed that companies with fewer board members have superior performance compared to companies with crowded boards (...)" https://www.researchgate.net/publication/321869618_The_Effect_of_Board_Size_on_Firm_Performance_Evidence_from_Turkey https://www.researchgate.net/publication/321869618_The_Effec...

influx 8y ago

Not only are tech salaries lower, the tech in Germany is shockingly bad. The mechanical engineering is world class, but try to buy a ticket online for the amazing train system, and it feels like using an Airline website from the 90s.

blahedo 8y ago
You're kidding, right? Two years ago I visited Germany and was able to find and buy train tickets with options including various connections of long-distance trains, local transit, and walking (with statable preferences on how much walking and waiting was allowable), which included connections in random cities as short as five minutes (but which worked!), store it all on my phone, and show it to a conductor, who took it all in stride. (Although some apologetically asked to see the credit card I'd used to buy it because the shitty US credit system hadn't caught up with European state of the art.) It was a substantially better experience than I could get in most of the US at the time, although Amtrak has gotten better about not looking surprised when my ticket is on my phone, and some cities have moved in good directions there too.
- JauntyHatAngle 8y ago
  Yeah not sure what he means. In Germany you can buy a train ticket using the app, show the QR code to the ticket inspector and he scans it. Done.
  - xioxox 8y ago
    It's not always so simple, as I found when I bought a "flexible" ticket from Germany to South Tyrol online. The ticket couldn't be printed, but had to be posted (an extra 4.50 euros!). It also wasn't possible to cancel online, but had to be posted back to the train company with a post mark dated before the date of travel. I tried to cancel it at the train station, but again this was not possible.
  - influx 8y ago
    Our group was six people, try buying six tickets online at once, and let me know how it goes :)

neves 8y ago

You'l need less if you live in a country that have public health care, good public schools, you can quickly travel by train to some of the greatest cities in the world, a vibrant cultural life, and one month vacations.

chimeracoder 8y ago
> You'l need less if you live in a country that have public health care, good public schools, you can quickly travel by train to some of the greatest cities in the world, a vibrant cultural life, and one month vacations. This is objectively not true, because the median American worker has a higher disposable income than the median worker in most of Europe, including Germany. This means that, even after paying for health insurance and out of pocket expenses, etc., Americans have higher purchasing power. The gap is even larger when you look at tech workers, because they're paid particularly well in the US compared to the general public.
- robertAngst 8y ago
  This is a very good point that people often overlook. The US has insane disposable income from top down. Even our low income have luxuries. The problem with healthcare stems from corruption within out government.
- AlexandrB 8y ago
  > This is objectively not true, because the median American worker has a higher disposable income than the median worker in most of Europe, including Germany. The gap disappears completely if you consider hours worked. Based on [1] and [2], the median German makes $19.52/hr in disposable income, while the median American makes $19.29/hr[3]. Given that Germany does better than the US on many health and education outcomes as well it must be doing something right. [1] https://en.wikipedia.org/wiki/Median_income#Median_equivalent_adult_income https://en.wikipedia.org/wiki/Median_income#Median_equivalen... [2] https://en.wikipedia.org/wiki/Working_time#Average_annual_hours_actually_worked_per_worker https://en.wikipedia.org/wiki/Working_time#Average_annual_ho... [3] Yes, I know the math is a little wonky, but I couldn't find median hours worked and had to settle for average. However, the distribution of hours worked is not as skewed as income given there's only a finite number of hours in a year.

jancsika 8y ago

Thiel's point is orthogonal to the point you are making. His point could just as easily be applied to an argument for the German system to have only three board members with one worker's representative member.

forapurpose 8y ago

> Many totally rational worker ideals (keep comfy job) are often very opposed to a company's ideals (upgrade technology, take new risks, automate) The premise trivializes worker's priorities and idealizes management's priorities. People's need for safety, money, job security, benefits, non-toxic environments, opportunity for advancement, reasonable hours and no off-the-clock work are not about 'comfy' - it's not a nicer office chair; these are their lives and careers; it's their kid's college tuition, their homes, and their health; it's their mental health and quality of life. Management also has plenty of self-interest and I don't find them so focused on efficiency. > Thiel He says plenty of outlandish things, and that quote fits his authoritarian bent. I don't take it at face value. Taking other people's ideas and priorities into account can be frustrating and it feels inefficient if you think you know everything. Too bad; that's your job as a leader.

kamaal 8y ago

There is also a phenomenon of 'diffusion of responsibility'. People think there are enough people to take care of the problems, and don't exactly have to intervene all the time.

pluma 8y ago

> Why are tech workers wages so low in Germany compared to the USA, if they have workers on the board? Because in Germany we have a lower cost of living compared to the tech hubs in the US. Also we have socialised welfare and healthcare systems. Additionally most Germany companies are more risk-averse and focus on long-term stability rather than massive growth. And on a more cynical note we also deregulated the labor market in the early 2000s to circumvent labor laws by outsourcing low-wage workers to temp agencies that are allowed to treat them like contractors without running afoul of laws intended to prevent this.