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Overpaid CEOs 2019

111 points by Flott 8y ago

trumped 8y ago
and to be one of those CEOs, you have to be a special kind of crook...
chrisbennet 8y ago
As a data point: ”U.S. CEOs earn from 400 to 500 times the median salary for workers. For CEOs in the U.K., the ratio is 22; in France, it's 15; and in Germany it's 12.” https://work.chron.com/ceo-compensation-vs-world-15509.html https://work.chron.com/ceo-compensation-vs-world-15509.html
Traster 8y ago
I feel like CEO pay is one of these emergent problems with our current system. We have this group of people whose salaries are just astronomical compared to the average person in the company, and whilst it's true their job could technically make more of a difference these payouts are totally asymmetrical and completely independent of how effective a CEO is.
- whatshisface 8y ago
  The CEO is the only person in the company who can really negotiate for what they're worth (instead of the commodity price for their labor) because business people don't usually have specialized irreplaceable positions and technical people are not usually negotiation experts.
  - dv_dt 8y ago
    CEO pay is often set by compensation subcommittees of the board. On the board are typically people who have familiarity with high-level management, often, suprise!, CEOs of other companies. By bias or intent this leads to excessive CEO pay.
- jjoonathan 8y ago
  Agreed. The fact that pay is often still astronomical in the case of the worst possible outcomes strongly suggests that leverage is just an excuse. I'm pretty sure that the real answer is that CEO pay is just the Rules for Rulers [1], capitalism style. [1] Rules for Rulers: https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs
- will_pseudonym 8y ago
  And when their pay is tied to some degree to "effectiveness," it's tied to performance of the stock price, instead of the actual performance of the company. It's much more difficult to quantify the latter, but short term increases of company stock can be brought about by sacrificing the long term outcomes of the company as a whole.
- hannasanarion 8y ago
  But pay is part of politics, and corporate government is less stingy than public government. Pay hikes are part of the game of alliance building that is played whenever the board elects a new CEO. Corporate government is plutocracy in practice.
- slap_shot 8y ago
  I wonder if it really is asymmetrical to value they bring. I've worked in companies where the market and the stage of the company put the pool of possible CEO candidates at a number that could be counted on one hand. I don't know anything about the video game industry or these CEOs, but I can't immediately assume they are overpaid. There are a lot of questions I'd need answered.
  - jjoonathan 8y ago
    A good CEO can create massive value, but the present value of any particular choice of CEO -- which should be an upper bound to the performance-independent pay they are able to negotiate -- needs to be diminished according to the uncertainty in the evaluation. That's where the leverage excuse falls apart: uncertainty is through the roof. Everybody's throwing darts at a dart board and everybody knows it, so if the story about rational value estimation and leverage were the whole truth we would not expect to see CEOs reliably paid stratospheric salaries for mediocre or failing performance, yet that's exactly what we see. We should therefore consider alternative explanations.
    - ryandrake 8y ago
      I’ve always wondered: if CEO pay was truly tied to their “creating value” then shouldn’t they lose money if they destroy value? If the answer is yes, then why aren’t bad CEOs losing money? If the answer is no, then why do we pretend they are paid in proportion to the value they create?
      - CountSessine 8y ago
        I’ve always wondered: if CEO pay was truly tied to their “creating value” then shouldn’t they lose money if they destroy value? Not necessarily. They'd be plain-old investors then. CEOs are like options traders who pay for their call options by working 60 hour weeks.
      - coredog64 8y ago
        In many cases, the lion's share of C-level pay is not straight up cash, but equity. They might still make money if they destroy value, but the better they do for the company, the better they do for themselves. That's what you're looking for, right? Better still, that stock compensation isn't really paid for by the company. The costs of paying with equity accrue to shareholders in the form of dilution.
- roenxi 8y ago
  It is highly suggestive that CEOs are the ones who determine the pay of CEOs, in practice. If the shareholders actually had to negotiate the remuneration packages I bet the CEOs wouldn't be able to command the salaries that they do. There isn't enough evidence that paying more for a CEO increases profits. The upper middle management strata is stuffed with exceptional people and the skillset to be a good CEO isn't actually that rare; it probably isn't a supply issue.
  - deleted 8y ago
    [deleted]
  - gradys 8y ago
    Isn't CEO compensation generally determined by the compensation committee of the board?
    - nopzor 8y ago
      at a large enough company with an independent enough board, sure. but these committees are largely driven by ceremony and politics under the guise of having to do with objectivity.
- zavi 8y ago
  Salaries are determined by market forces. Board pays CEO as much as they value her or him. "Pay gap" between CEOs and proletariat is a meme and as such should not be considered seriously.
- mc32 8y ago
  Apparently the CEO of Renault Nissan while compensated fairly compared to Hapanese counterparts, was unhappy that compared to NA and EU auto companies he wasn’t so set out to set up another unofficial compensation mechanism to bring him closer to the global pay scale.
  - decebalus1 8y ago
    poor Carlos, his friends were probably giving him shit about the size of his yacht.
- skookumchuck 8y ago
  CEO pay comes out of stockholders' pockets. If you believe corporate money is wasted on them, don't buy their stock. > completely independent of how effective a CEO is. It's not for you to judge that, it's for the shareholders to.
- throway88989898 8y ago
  > emergent problem How exactly is it a problem? Surely we'd rather overvalue CEOs than under-serve them? > these payouts are totally asymmetrical and completely independent of how effective a CEO is What are good metrics for this claim? How should we measure effectiveness-salary ratio? Why should they not be asymmetrical? Just curious and trying to clarify the points being made.
munk-a 8y ago
The CEO (and upper management in general) pay scale is total BS when viewed through normal compensation lenses, unlike normal people who are paid for their time, upper management is usually compensated on performance -but- they are compensated on the performance of their company (or division) and they get all the pie. Since nobody else's pay is scaling with performance (outside of bonuses which in my experience usually don't exceed 5% annual salary) their salaries end up inappropriate scaled into the stratosphere because the company's performance justifies increasing compensation to employees to retain them and sustain that performance. In actuality employee retention is bottoming out in the modern era (compare it to the 60s) and people are the top make f-u money that is so out of step with the people doing work at a company that it isn't even comparable. Wealth and earnings inequality is a serious issue in this modern world and it's ridiculous, some people are more efficient than other people, nobody is 100x more efficient than anyone else. Take an arbitrary dude off the street and give them the experience of a CEO and I bet you that substituting him in would at most lose the company 40% of growth/whatever.
- manigandham 8y ago
  >> Take an arbitrary dude off the street and give them the experience of a CEO That experience takes decades of results to earn which is precisely why they're worth so much. Of course it's meaningless if you can magically train anyone else that easily. >> at most lose the company 40% of growth/whatever That would put most companies out of business. Would you like your employer to lose 40% of their staff? >> nobody is 100x more efficient than anyone else Yes they are, you just haven't worked with them. The networks and wisdom the top people build up is what helps them lead companies and make decisions for 1000s of employees with billions at stake. What they can do with a few phone calls can easily surpass the output of 100 startups. This article is also talking about the TOP companies which obviously requires top talent. This is nowhere near the average and these salaries reflect the immense stress and responsibility that comes with the job. If you think you can lead a company this large that easily then you really do not understand what the position entails.
- donavanm 8y ago
  > upper management is usually compensated on performance -but- they are compensated on the performance of their company No? Thats one of the problems. Over the larger industry pool, and controlling for volatility, executive pay doesnt actually reflect company performance. Theyre closer fund managers hyping beta and past hits, but underperforming the averages.
ahelwer 8y ago
Software engineer unions are coming, and it will start with the games industry. Attitudes within our field are changing! Used to be you couldn't mention the U-word without a dozen engineers jumping down your throat bellowing about "efficiency" (for whom and what?) but engineers are smart and you can only fool them with the same old anti-union propaganda for so long.
- ocdtrekkie 8y ago
  Yes, though I think the key word that was keeping people from realizing software developers needed unions was "meritocracy". Developers were sold on the idea that people wanting union protection were replaceable, and that they, being the fantastic coders they were, were not.
  - stale2002 8y ago
    No, the bigger reason why unions are never going to happen in the tech industry (thankfully), is that many unions and guilds intentionally create huge barriers to entry, in order to keep out people from non-traditional backgrounds, in order to reduce competition. IE, to keep out immigrants, newbies, and people without degrees. But over the last 10 years or so, there has been a huge influx of new people into the tech industry, and we are starting to outnumber those from traditional backgrounds who would have tried to prevent us from getting a job in the industry. A bootcamper isn't going to join a union that would have outlawed their ability to get a job. An immigrant isn't going to join a union that would have them deported. Instead, we will defect and sabotage those efforts, every step of the way. And there really are quite a lot of us in the tech industry, from non-traditional backgrounds these days. And we are smart enough to fight efforts that would have us fired, or that would pull up the ladder behind us.
  - bit_logic 8y ago
    Developers are finally realizing the following have nothing to do with "meritocracy": - Non-compete agreements - Forced arbitration - Wage fixing (such as Google, Apple, etc. used to do) - IP ownership agreements (even when not using company equipment or time) - H1B visa abuse - And many more Maybe it's also a marketing problem, don't call it a union, call it a guild or association.
deleted 8y ago
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simplecomplex 8y ago
Everyone is free to be a CEO. If salaries are really too high it should be easy to get a CEO position by undercutting everyone else. It’s easy to sit on the sidelines and complain other people are making too much money. Remember that CEOs making less wont result in employees making more. Maybe it’s just me, but HN lately seems dominated by whiny/complaining articles that don’t really contribute any knowledge or enhance our lives. Wouldn’t it be better to focus on how one could become a CEO rather than knee jerk reactions to people making lots of money?
- cronix 8y ago
  People are also free to vote for people like Ocasio-Cortez, who are more than willing to take it from the top as it continues to spiral out of whack. You can only displace the bottom for so long, until they get fed up enough and vote for radical change, or worse. That's probably not what most want, myself included, but here we are going from 20:1 in the 70's to 300:1. How far do you think that can reasonably keep tilting until people force a correction? There is a tipping point, and it's not infinite. It's not a knee jerk reaction to people making a lot of money. It's an honest reaction to watching the people at the top continue to grow and grow and grow over the last 40 years while the rest are basically paid the same (adjusted for inflation) as they were making 20 years ago. It's not me you need to convince. It's the tens of millions of people who are barely making it, watching others get tax breaks while they truly struggle with the basics of life. We're not at a reasonable balance any longer, and haven't been. We can continue the status quo, and change will eventually be forced. Something reasonable needs to give here, and the answer isn't everybody becoming a CEO.
  - Mirioron 8y ago
    >People are also free to vote for people like Ocasio-Cortez She got elected because of the primary. She isn't exactly a vote magnet. >That's probably not what most want, myself included, but here we are going from 20:1 in the 70's to 300:1. You are fed a narrative. There are people actively working against capitalism that will try to craft a narrative at every turn. Think critically about what you just said: CEO-to-worker pay ratio has gone from 20:1 to 300:1 in top firms in the US. That last part is very important. The evaluation of those companies has increased as has the average number of employees. The CEO of Walmart needs much better skills compared to the CEO of a corner store. Walmart has over 2 million employees nowadays and they have a revenue of $500 billion. On the other hand, the skills and responsibility required from a clerk at Walmart are similar to the responsibilities and skills of a clerk at the corner store. >Something reasonable needs to give here, People need to stop buying into a narrative. >and the answer isn't everybody becoming a CEO. The reason he brought up everybody becoming a CEO is because the job of a CEO of these top companies is very difficult. You need very skilled people that are also very positive towards the company, because even the smallest mistakes by them can make the company suffer a lot of losses.
CyberDildonics 8y ago
Reed Hastings founded Netflix and built it into what it is now, a dominant player in the entertainment industry. He did it through a long history of crafty, well planned technology and entertainment decisions. Not only this but he was able to build it up from so little and in such a small amount of time.
- HaloZero 8y ago
  The average salary also seems to be $180,000 which is pretty good.
  - nopzor 8y ago
    Not really a relevant metric imo
lefstathiou 8y ago
I believe CEOs are compensated what they are in order to get them thinking like “owners” which many “professional” CEOs are not ultimately. Mark Zuckerberg, Steve Ballmer, Gates, Jobs don’t/didn’t need large salaries because their identities were tied to their companies. Owners eat sleep and breath their company in a way the average salaried employee plucked at random from +10,000 employee company will not. To the points made by other comments, the CEO is entrusted to make decisions that can ripple through thousands instantly. The amount of value they can create or destroy in an instant is probably roughly in line with the multiple they are paid over the average employee. Thus their negotiating leverage is high and equity holders are happy to pay the price. Said differently, if you owned all the equity of Google, how much would you be willing to pay to ensure that equity is protected? I think that number is more than 10x the salary of the average Google developer. This is subject to the laws of supply and demand like any other system and it is pretty rational.
- CptFribble 8y ago
  This is actually pretty insightful, and it leads to an interesting question: If CEO pay is a rational outcome of protecting the equity in a company, and CEO pay is too high, does that mean there's "too much" equity? There's some evidence that income inequality is bad for society in some ways, which I tend to agree with if it means inefficient/uneven distribution of resources/opportunities/community investments. In this sense, and considering the previous question of "too much equity," is it possible that a company's market value can be too high?
  - pm90 8y ago
    Too high in what sense? Just too high in absolute dollars? Equity is not the same as cash; its a gamble: you're willing to pay a certain amount of money for something that you're betting will increase (or at least hold) value.
- bitxbit 8y ago
  You really should not be a CEO if you’re mostly in it for the money. That’s not leadership.
ajobforme 8y ago
how can mattel's median pay be 6k?
- brianwawok 8y ago
  Overseas?
- freeflight 8y ago
  They mostly make plastic toys, I guess the brunt of their workforce is made up of low-paid foreign manufacturing?
deleted 8y ago
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deleted_account 8y ago
This is the actual report: https://www.asyousow.org/report/the-100-most-overpaid-ceos-2019 https://www.asyousow.org/report/the-100-most-overpaid-ceos-2... The methodology "lists the 25 most overpaid CEOs, identifying the company, the CEO and his pay as reported at the annual shareholder meeting, and the pay of the company’s median employee." Activision Blizzard's Kotick's $25M comes in at 306:1; Electronic Arts' Andrew Wilson's $35M is 371:1 . Ronald F. Clarke of Fleetcor Technologies Inc is a generous 1517:1.
goldcd 8y ago
Activision Blizzard googles 4k employees and.. Last year managed to re-make Crash Bandicoot & Spyro - and a CoD. That's it. https://en.wikipedia.org/wiki/List_of_Activision_video_games https://en.wikipedia.org/wiki/List_of_Activision_video_games That boggles my mind.. That CEO salary seems rather on the high side. I could have told them to "do another CoD" and rummage in the vault.
- goldcd 8y ago
  EA seems to be doing better - there's a few new things in there once you strip out Battlefield, Sims and the Sports stuff - but still.. ..For some reason I'd still thought the big publishers were some massive force of nature, crushing all in their path. We could stand on the side-lines booing their latest monetization strategy, but I'd still considered them to be invincible monsters. I'd imagined I'd see a list of a load of games I'd never heard of. Games they'd taken a punt on that hadn't paid off - as that's what I imagined you did as a corporate monster. 80% would vanish breaking even if lucky, and 20% would make 80% of your income. That's how you stay big. Instead their entire output appears to be just rubber-stamping iterations of past glories. I genuinely feel a bit sad now I've looked into it. They're still monsters, but of the dinosaur variety.
  - freeflight 8y ago
    > We could stand on the side-lines booing their latest monetization strategy, but I'd still considered them to be invincible monsters. I think that's been falling apart for a while now due to fan backlash. Activision has never been very popular, now Blizzard fans have finally gotten the message that they are one and the same, reacting in overblown ways to mobile announcements. EA struggles from the same reputation issue as Activision. The latest Battlefield was met with quite some hostility and afaik hasn't been doing very well commercially, while the last Mass Effect received luke-warm reception killing the franchise for good. If it wasn't for that very smart PR move of keeping Apex Legends under wraps, until release, EA would also be in quite some trouble now. Particularly with Anthem underwhelming people everywhere, confirming the notion that whatever made Bioware special, is by now long gone. Doesn't look that much better at Bethesda with their Fallout 76, after years of taking the fan-goodwill for granted, they've now managed to really piss people off. Take2 and Ubisoft have mostly managed to pull through unscathed so far, but imho overall this is the result of indie development and publishing having gotten as strong as they are now. Nowadays consumers can choose from a wide selection of very high-quality games, often sold below the usual full-retail price and they've become very aware of it. If the established big players want to keep their dominance they need to change their course heavily, show actual goodwill instead of constant willingness to exploit every commercial angle available.
hnbroseph 8y ago
large corporations seem more like corporate aristocratic states. the ceos are frequently so thoroughly divorced from the common plebs in the trenches doing the actual work that enables the company to actually exist. this divorce also seems to show up in how compensation and performance apparently has so limited correlation.
ggregoire 8y ago
For reminder, Activision Blizzard laid off 800 people last week.
mmmmmmmmm 8y ago
This is their description of their methodology: > HIP Investor regression we’ve used every year that computes excess CEO pay assuming such pay is related to total shareholder return (TSR). The second ranking identified the companies where the most shares were voted against the CEO pay package. These two rankings were weighted 2:1, with the regression analysis being the majority. We then excluded those CEOs whose total disclosed compensation (TDC) was in the lowest third of all the S&P 500 CEO pay packages. The full list of the 100 most overpaid CEOs using this methodology is found in Appendix A. The regression analysis of predicted and excess pay performed by HIP Investor is found in Appendix C, and its methodology is more fully explained there. This doesn't make any sense. Hell, the first sentence isn't even a sentence. I suspect the reason this doesn't make any sense is because they don't actually have a coherent methodology. They just want to complain about CEOs making too much money, so they'll create any arbitrary measure to attach numbers to their complaint. Notice how they never once mention who the most underpaid CEOs are. They surely have that data and it would be just as interesting as the most overpaid. They don't release it because they care more about their agenda than about giving you unbiased information.
_cs2017_ 8y ago
If EA Board could snatch a CEO they like for $5M/year, they would. So why don't they? I'm sure there are thousands of professional managers with solid game industry experience who'd be ecstatic to be offered a CEO position in either company at $5M / year or less. The Board clearly think they are not good enough, and limit their candidate search to people with very special credentials (e.g., those who've served as top executives in large companies, etc.). Such a high bar limits the candidate supply a lot, and then the competition for those candidates between companies drive up the pay (quite similar to NBA or NFL). Why is Board so obsessed with credentials? Is it because they want to play it safe (kinda like dumb execs choose Oracle over open source solutions because they want to protect themselves from criticism by going with a famous brand)? Or is it because those credentials are truly imporant for the success of EA? I don't know for certain but I suspect the answer is kinda in between. The quality of a CEO candidate is really hard to judge. So the Boards think like this: > We'll screen for all the obvious things (experience, references, track record, culture fit, etc.). Hundreds of people will pass that screen. We have no clue of how to choose among them, so we might as well go for someone who's done it before. Perhaps we don't need to be so restrictive. But there's a chance it actually does matter, say maybe 10% chance that a person who's been a top exec before will do better than candidates without such credentials. A good CEO can increase corporate value by billions of dollars over a few years, so even a 10% chance is worth a lot. So let's go bid for one of those bigshot ex-CEOs, even if that means we have to pay an extra $20M/year. So in some sense, high CEO pay is due to the "religious" belief that whoever made it to the top is super good. Maybe this religious belief is actually rational, maybe not. I kinda suspect the latter, since other countries seem to pay CEOs a lot less; I find it unlikely that the US CEOs have such unusually high skill compared to the rest of the world. But I don't have high confidence in my opinion.
- eanzenberg 8y ago
  This is pretty much the right answer in a sea of nonsense and angry comments here. CEO pay is where it is because those boards believe it’s necessary. If they thought they could pay 5mm instead of 20mm they would in a heartbeat.
evadne 8y ago
Relevant book: The CEO Pay Machine @ https://www.amazon.co.uk/dp/0735212392 https://www.amazon.co.uk/dp/0735212392
system2 8y ago
Why would anyone care about how much CEOs make? It is private industry, if the board or owner wants to pay, CEOs get paid. It is not like they are stealing tax payer's money to pay these people. When the CEOs expire, they are also replaced. It is called business.
- perfmode 8y ago
  What’s behind the growing ceo to employee income ratio?
  - T2_t2 8y ago
    Just some causes that I think are mostly good: 1. Complexity - a change in exchange rates can hurt Netflix's / Google's / Apple's profit, even if all underlying numbers are correct. Guessing exchange rates is a terrifyingly difficult task, and it is just one of many complications 2019 CEOs have over 1969, let alone 1919. 2. Globalisation - rather ironically, if a company employs an extra 10% of people - no one loses their job they just add an extra 10% - the ratio likely gets larger. How is that a BAD thing that more people are employed? Mattel is the most telling in this context ($6,271 average worker salary). IMHO it's a GOOD thing that Mattel directly employs workers, rather than using a, say, Foxconn. But it makes the ratio a lot worse. Obfuscating real worker wages is bad for workers, but good for avoiding ending up on these sorts of reports. 3. Market size - a follow on from 2, if Google makes 50% of it's revenue outside of the USA, what should the ratio relate to? US workers to CEO? Or South African? A lot of these CEOs are multi-country CEOs, and that is a level of difficulty beyond what existed a quarter century ago. 4. Market forces - a law to make CEO pay public means it is signaling something negative when a CEO makes a low ratio, which drives it up. Having public records of salary makes negotiating easier for workers, and CEOs are no different, so it has had a double upwards pressure. Just some things that have made it grow over time.
  - Mirioron 8y ago
    These kinds of articles like to play tricks to paint a narrative. Take this paragraph for example: >Yet overall CEO pay continues to increase. According to Institutional Shareholder Services (ISS) the average pay for a CEO in the S&P 500 grew from $11.5 million in 2013 to $13.6 million in 2017. Notice how it says "overall CEO pay" but then goes on to cite statistics for the average CEO of an S&P 500 company? It's a very common tactic whenever CEO compensation is discussed. CEO pay is increasing for these companies though and one reason for it is that these companies are becoming bigger and bigger. This means that a CEO is responsible for more people and companies want more qualified candidates for that. Meanwhile the median employee usually doesn't have additional responsibility compared to the past. Let's look at Walmart and a corner store. The clerk working at Walmart and the clerk working at a corner store roughly have the same responsibilities. On the other hand, the CEO of the corner store is responsible for 5 employees, but the CEO of Walmart is responsible for 2 million employees and this responsibility is growing. Edit: I'm not saying that this explains the entire difference, but it's definitely one part of it.
throway88989898 8y ago
> computes excess CEO pay assuming such pay is related to total shareholder return (TSR) Is this a reasonable assumption?
Flott 8y ago
This is the source cited in the article here https://news.ycombinator.com/item?id=19229502 https://news.ycombinator.com/item?id=19229502 I think the article is interesting enough to have it's own discussion.
- dang 8y ago
  You're right that that should be the URL. "Please submit the original source. If a post reports on something found on another site, submit the latter." (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html) But it doesn't make sense to have two threads about this on the front page, so we'll merge them. I guess I'll merge the comments from that one into this one as a crude form of karma sharing.
blaze33 8y ago
Somehow related, but what defines a fair salary? Are higher up employees actually bringing more value to their company or somehow extracting it from others? If your pay doesn't match the value of your work, I guess someone logically profits from it?
jjtheblunt 8y ago
I think it's hard to find a more flagrant exploitation of overcompensation than that of Angela Ahrendts at Apple: given something like $70 million to join, quitting 4 years to the week after starting, as if just used Tim Cook's good will to profit, disgusted many of us hardcore engineers when hired that compensation saw someone with no technical history so rewarded.
anderspitman 8y ago
Netflix's median employee salary is ~$180,000? Seems really high. Do they have a non-traditional org chart?
discobean 8y ago
TIL I need to work @ netflix
dandare 8y ago
Technical comment: the table in the article is not scrollable nor zoomable on my Galaxy s6, I can see only the leftmost digit of the CEO salary. Quite a bummer in 2019.
choppaface 8y ago
This list appears to be missing the CEOs of banks. People like Jamie Dimon who profited from the financial crisis should probably be on this list for life.

Overpaid CEOs 2019

111 points by Flott 8y ago

and to be one of those CEOs, you have to be a special kind of crook...

As a data point: ”U.S. CEOs earn from 400 to 500 times the median salary for workers. For CEOs in the U.K., the ratio is 22; in France, it's 15; and in Germany it's 12.” https://work.chron.com/ceo-compensation-vs-world-15509.html https://work.chron.com/ceo-compensation-vs-world-15509.html

Traster 8y ago

I feel like CEO pay is one of these emergent problems with our current system. We have this group of people whose salaries are just astronomical compared to the average person in the company, and whilst it's true their job could technically make more of a difference these payouts are totally asymmetrical and completely independent of how effective a CEO is.

whatshisface 8y ago
The CEO is the only person in the company who can really negotiate for what they're worth (instead of the commodity price for their labor) because business people don't usually have specialized irreplaceable positions and technical people are not usually negotiation experts.
- dv_dt 8y ago
  CEO pay is often set by compensation subcommittees of the board. On the board are typically people who have familiarity with high-level management, often, suprise!, CEOs of other companies. By bias or intent this leads to excessive CEO pay.
jjoonathan 8y ago
Agreed. The fact that pay is often still astronomical in the case of the worst possible outcomes strongly suggests that leverage is just an excuse. I'm pretty sure that the real answer is that CEO pay is just the Rules for Rulers [1], capitalism style. [1] Rules for Rulers: https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs
will_pseudonym 8y ago
And when their pay is tied to some degree to "effectiveness," it's tied to performance of the stock price, instead of the actual performance of the company. It's much more difficult to quantify the latter, but short term increases of company stock can be brought about by sacrificing the long term outcomes of the company as a whole.
hannasanarion 8y ago
But pay is part of politics, and corporate government is less stingy than public government. Pay hikes are part of the game of alliance building that is played whenever the board elects a new CEO. Corporate government is plutocracy in practice.
slap_shot 8y ago
I wonder if it really is asymmetrical to value they bring. I've worked in companies where the market and the stage of the company put the pool of possible CEO candidates at a number that could be counted on one hand. I don't know anything about the video game industry or these CEOs, but I can't immediately assume they are overpaid. There are a lot of questions I'd need answered.
- jjoonathan 8y ago
  A good CEO can create massive value, but the present value of any particular choice of CEO -- which should be an upper bound to the performance-independent pay they are able to negotiate -- needs to be diminished according to the uncertainty in the evaluation. That's where the leverage excuse falls apart: uncertainty is through the roof. Everybody's throwing darts at a dart board and everybody knows it, so if the story about rational value estimation and leverage were the whole truth we would not expect to see CEOs reliably paid stratospheric salaries for mediocre or failing performance, yet that's exactly what we see. We should therefore consider alternative explanations.
  - ryandrake 8y ago
    I’ve always wondered: if CEO pay was truly tied to their “creating value” then shouldn’t they lose money if they destroy value? If the answer is yes, then why aren’t bad CEOs losing money? If the answer is no, then why do we pretend they are paid in proportion to the value they create?
    - CountSessine 8y ago
      I’ve always wondered: if CEO pay was truly tied to their “creating value” then shouldn’t they lose money if they destroy value? Not necessarily. They'd be plain-old investors then. CEOs are like options traders who pay for their call options by working 60 hour weeks.
    - coredog64 8y ago
      In many cases, the lion's share of C-level pay is not straight up cash, but equity. They might still make money if they destroy value, but the better they do for the company, the better they do for themselves. That's what you're looking for, right? Better still, that stock compensation isn't really paid for by the company. The costs of paying with equity accrue to shareholders in the form of dilution.
roenxi 8y ago
It is highly suggestive that CEOs are the ones who determine the pay of CEOs, in practice. If the shareholders actually had to negotiate the remuneration packages I bet the CEOs wouldn't be able to command the salaries that they do. There isn't enough evidence that paying more for a CEO increases profits. The upper middle management strata is stuffed with exceptional people and the skillset to be a good CEO isn't actually that rare; it probably isn't a supply issue.
- deleted 8y ago
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- gradys 8y ago
  Isn't CEO compensation generally determined by the compensation committee of the board?
  - nopzor 8y ago
    at a large enough company with an independent enough board, sure. but these committees are largely driven by ceremony and politics under the guise of having to do with objectivity.
zavi 8y ago
Salaries are determined by market forces. Board pays CEO as much as they value her or him. "Pay gap" between CEOs and proletariat is a meme and as such should not be considered seriously.
mc32 8y ago
Apparently the CEO of Renault Nissan while compensated fairly compared to Hapanese counterparts, was unhappy that compared to NA and EU auto companies he wasn’t so set out to set up another unofficial compensation mechanism to bring him closer to the global pay scale.
- decebalus1 8y ago
  poor Carlos, his friends were probably giving him shit about the size of his yacht.
skookumchuck 8y ago
CEO pay comes out of stockholders' pockets. If you believe corporate money is wasted on them, don't buy their stock. > completely independent of how effective a CEO is. It's not for you to judge that, it's for the shareholders to.
throway88989898 8y ago
> emergent problem How exactly is it a problem? Surely we'd rather overvalue CEOs than under-serve them? > these payouts are totally asymmetrical and completely independent of how effective a CEO is What are good metrics for this claim? How should we measure effectiveness-salary ratio? Why should they not be asymmetrical? Just curious and trying to clarify the points being made.

munk-a 8y ago

The CEO (and upper management in general) pay scale is total BS when viewed through normal compensation lenses, unlike normal people who are paid for their time, upper management is usually compensated on performance -but- they are compensated on the performance of their company (or division) and they get all the pie. Since nobody else's pay is scaling with performance (outside of bonuses which in my experience usually don't exceed 5% annual salary) their salaries end up inappropriate scaled into the stratosphere because the company's performance justifies increasing compensation to employees to retain them and sustain that performance. In actuality employee retention is bottoming out in the modern era (compare it to the 60s) and people are the top make f-u money that is so out of step with the people doing work at a company that it isn't even comparable. Wealth and earnings inequality is a serious issue in this modern world and it's ridiculous, some people are more efficient than other people, nobody is 100x more efficient than anyone else. Take an arbitrary dude off the street and give them the experience of a CEO and I bet you that substituting him in would at most lose the company 40% of growth/whatever.

manigandham 8y ago
>> Take an arbitrary dude off the street and give them the experience of a CEO That experience takes decades of results to earn which is precisely why they're worth so much. Of course it's meaningless if you can magically train anyone else that easily. >> at most lose the company 40% of growth/whatever That would put most companies out of business. Would you like your employer to lose 40% of their staff? >> nobody is 100x more efficient than anyone else Yes they are, you just haven't worked with them. The networks and wisdom the top people build up is what helps them lead companies and make decisions for 1000s of employees with billions at stake. What they can do with a few phone calls can easily surpass the output of 100 startups. This article is also talking about the TOP companies which obviously requires top talent. This is nowhere near the average and these salaries reflect the immense stress and responsibility that comes with the job. If you think you can lead a company this large that easily then you really do not understand what the position entails.
donavanm 8y ago
> upper management is usually compensated on performance -but- they are compensated on the performance of their company No? Thats one of the problems. Over the larger industry pool, and controlling for volatility, executive pay doesnt actually reflect company performance. Theyre closer fund managers hyping beta and past hits, but underperforming the averages.

ahelwer 8y ago

Software engineer unions are coming, and it will start with the games industry. Attitudes within our field are changing! Used to be you couldn't mention the U-word without a dozen engineers jumping down your throat bellowing about "efficiency" (for whom and what?) but engineers are smart and you can only fool them with the same old anti-union propaganda for so long.

ocdtrekkie 8y ago
Yes, though I think the key word that was keeping people from realizing software developers needed unions was "meritocracy". Developers were sold on the idea that people wanting union protection were replaceable, and that they, being the fantastic coders they were, were not.
- stale2002 8y ago
  No, the bigger reason why unions are never going to happen in the tech industry (thankfully), is that many unions and guilds intentionally create huge barriers to entry, in order to keep out people from non-traditional backgrounds, in order to reduce competition. IE, to keep out immigrants, newbies, and people without degrees. But over the last 10 years or so, there has been a huge influx of new people into the tech industry, and we are starting to outnumber those from traditional backgrounds who would have tried to prevent us from getting a job in the industry. A bootcamper isn't going to join a union that would have outlawed their ability to get a job. An immigrant isn't going to join a union that would have them deported. Instead, we will defect and sabotage those efforts, every step of the way. And there really are quite a lot of us in the tech industry, from non-traditional backgrounds these days. And we are smart enough to fight efforts that would have us fired, or that would pull up the ladder behind us.
- bit_logic 8y ago
  Developers are finally realizing the following have nothing to do with "meritocracy": - Non-compete agreements - Forced arbitration - Wage fixing (such as Google, Apple, etc. used to do) - IP ownership agreements (even when not using company equipment or time) - H1B visa abuse - And many more Maybe it's also a marketing problem, don't call it a union, call it a guild or association.

deleted 8y ago

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simplecomplex 8y ago

Everyone is free to be a CEO. If salaries are really too high it should be easy to get a CEO position by undercutting everyone else. It’s easy to sit on the sidelines and complain other people are making too much money. Remember that CEOs making less wont result in employees making more. Maybe it’s just me, but HN lately seems dominated by whiny/complaining articles that don’t really contribute any knowledge or enhance our lives. Wouldn’t it be better to focus on how one could become a CEO rather than knee jerk reactions to people making lots of money?

cronix 8y ago
People are also free to vote for people like Ocasio-Cortez, who are more than willing to take it from the top as it continues to spiral out of whack. You can only displace the bottom for so long, until they get fed up enough and vote for radical change, or worse. That's probably not what most want, myself included, but here we are going from 20:1 in the 70's to 300:1. How far do you think that can reasonably keep tilting until people force a correction? There is a tipping point, and it's not infinite. It's not a knee jerk reaction to people making a lot of money. It's an honest reaction to watching the people at the top continue to grow and grow and grow over the last 40 years while the rest are basically paid the same (adjusted for inflation) as they were making 20 years ago. It's not me you need to convince. It's the tens of millions of people who are barely making it, watching others get tax breaks while they truly struggle with the basics of life. We're not at a reasonable balance any longer, and haven't been. We can continue the status quo, and change will eventually be forced. Something reasonable needs to give here, and the answer isn't everybody becoming a CEO.
- Mirioron 8y ago
  >People are also free to vote for people like Ocasio-Cortez She got elected because of the primary. She isn't exactly a vote magnet. >That's probably not what most want, myself included, but here we are going from 20:1 in the 70's to 300:1. You are fed a narrative. There are people actively working against capitalism that will try to craft a narrative at every turn. Think critically about what you just said: CEO-to-worker pay ratio has gone from 20:1 to 300:1 in top firms in the US. That last part is very important. The evaluation of those companies has increased as has the average number of employees. The CEO of Walmart needs much better skills compared to the CEO of a corner store. Walmart has over 2 million employees nowadays and they have a revenue of $500 billion. On the other hand, the skills and responsibility required from a clerk at Walmart are similar to the responsibilities and skills of a clerk at the corner store. >Something reasonable needs to give here, People need to stop buying into a narrative. >and the answer isn't everybody becoming a CEO. The reason he brought up everybody becoming a CEO is because the job of a CEO of these top companies is very difficult. You need very skilled people that are also very positive towards the company, because even the smallest mistakes by them can make the company suffer a lot of losses.

CyberDildonics 8y ago

Reed Hastings founded Netflix and built it into what it is now, a dominant player in the entertainment industry. He did it through a long history of crafty, well planned technology and entertainment decisions. Not only this but he was able to build it up from so little and in such a small amount of time.

HaloZero 8y ago
The average salary also seems to be $180,000 which is pretty good.
- nopzor 8y ago
  Not really a relevant metric imo

lefstathiou 8y ago

I believe CEOs are compensated what they are in order to get them thinking like “owners” which many “professional” CEOs are not ultimately. Mark Zuckerberg, Steve Ballmer, Gates, Jobs don’t/didn’t need large salaries because their identities were tied to their companies. Owners eat sleep and breath their company in a way the average salaried employee plucked at random from +10,000 employee company will not. To the points made by other comments, the CEO is entrusted to make decisions that can ripple through thousands instantly. The amount of value they can create or destroy in an instant is probably roughly in line with the multiple they are paid over the average employee. Thus their negotiating leverage is high and equity holders are happy to pay the price. Said differently, if you owned all the equity of Google, how much would you be willing to pay to ensure that equity is protected? I think that number is more than 10x the salary of the average Google developer. This is subject to the laws of supply and demand like any other system and it is pretty rational.

CptFribble 8y ago
This is actually pretty insightful, and it leads to an interesting question: If CEO pay is a rational outcome of protecting the equity in a company, and CEO pay is too high, does that mean there's "too much" equity? There's some evidence that income inequality is bad for society in some ways, which I tend to agree with if it means inefficient/uneven distribution of resources/opportunities/community investments. In this sense, and considering the previous question of "too much equity," is it possible that a company's market value can be too high?
- pm90 8y ago
  Too high in what sense? Just too high in absolute dollars? Equity is not the same as cash; its a gamble: you're willing to pay a certain amount of money for something that you're betting will increase (or at least hold) value.
bitxbit 8y ago
You really should not be a CEO if you’re mostly in it for the money. That’s not leadership.

ajobforme 8y ago

how can mattel's median pay be 6k?

brianwawok 8y ago
Overseas?
freeflight 8y ago
They mostly make plastic toys, I guess the brunt of their workforce is made up of low-paid foreign manufacturing?

deleted 8y ago

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deleted_account 8y ago

This is the actual report: https://www.asyousow.org/report/the-100-most-overpaid-ceos-2019 https://www.asyousow.org/report/the-100-most-overpaid-ceos-2... The methodology "lists the 25 most overpaid CEOs, identifying the company, the CEO and his pay as reported at the annual shareholder meeting, and the pay of the company’s median employee." Activision Blizzard's Kotick's $25M comes in at 306:1; Electronic Arts' Andrew Wilson's $35M is 371:1 . Ronald F. Clarke of Fleetcor Technologies Inc is a generous 1517:1.

goldcd 8y ago

Activision Blizzard googles 4k employees and.. Last year managed to re-make Crash Bandicoot & Spyro - and a CoD. That's it. https://en.wikipedia.org/wiki/List_of_Activision_video_games https://en.wikipedia.org/wiki/List_of_Activision_video_games That boggles my mind.. That CEO salary seems rather on the high side. I could have told them to "do another CoD" and rummage in the vault.

goldcd 8y ago
EA seems to be doing better - there's a few new things in there once you strip out Battlefield, Sims and the Sports stuff - but still.. ..For some reason I'd still thought the big publishers were some massive force of nature, crushing all in their path. We could stand on the side-lines booing their latest monetization strategy, but I'd still considered them to be invincible monsters. I'd imagined I'd see a list of a load of games I'd never heard of. Games they'd taken a punt on that hadn't paid off - as that's what I imagined you did as a corporate monster. 80% would vanish breaking even if lucky, and 20% would make 80% of your income. That's how you stay big. Instead their entire output appears to be just rubber-stamping iterations of past glories. I genuinely feel a bit sad now I've looked into it. They're still monsters, but of the dinosaur variety.
- freeflight 8y ago
  > We could stand on the side-lines booing their latest monetization strategy, but I'd still considered them to be invincible monsters. I think that's been falling apart for a while now due to fan backlash. Activision has never been very popular, now Blizzard fans have finally gotten the message that they are one and the same, reacting in overblown ways to mobile announcements. EA struggles from the same reputation issue as Activision. The latest Battlefield was met with quite some hostility and afaik hasn't been doing very well commercially, while the last Mass Effect received luke-warm reception killing the franchise for good. If it wasn't for that very smart PR move of keeping Apex Legends under wraps, until release, EA would also be in quite some trouble now. Particularly with Anthem underwhelming people everywhere, confirming the notion that whatever made Bioware special, is by now long gone. Doesn't look that much better at Bethesda with their Fallout 76, after years of taking the fan-goodwill for granted, they've now managed to really piss people off. Take2 and Ubisoft have mostly managed to pull through unscathed so far, but imho overall this is the result of indie development and publishing having gotten as strong as they are now. Nowadays consumers can choose from a wide selection of very high-quality games, often sold below the usual full-retail price and they've become very aware of it. If the established big players want to keep their dominance they need to change their course heavily, show actual goodwill instead of constant willingness to exploit every commercial angle available.

hnbroseph 8y ago

large corporations seem more like corporate aristocratic states. the ceos are frequently so thoroughly divorced from the common plebs in the trenches doing the actual work that enables the company to actually exist. this divorce also seems to show up in how compensation and performance apparently has so limited correlation.

ggregoire 8y ago

For reminder, Activision Blizzard laid off 800 people last week.

mmmmmmmmm 8y ago

This is their description of their methodology: > HIP Investor regression we’ve used every year that computes excess CEO pay assuming such pay is related to total shareholder return (TSR). The second ranking identified the companies where the most shares were voted against the CEO pay package. These two rankings were weighted 2:1, with the regression analysis being the majority. We then excluded those CEOs whose total disclosed compensation (TDC) was in the lowest third of all the S&P 500 CEO pay packages. The full list of the 100 most overpaid CEOs using this methodology is found in Appendix A. The regression analysis of predicted and excess pay performed by HIP Investor is found in Appendix C, and its methodology is more fully explained there. This doesn't make any sense. Hell, the first sentence isn't even a sentence. I suspect the reason this doesn't make any sense is because they don't actually have a coherent methodology. They just want to complain about CEOs making too much money, so they'll create any arbitrary measure to attach numbers to their complaint. Notice how they never once mention who the most underpaid CEOs are. They surely have that data and it would be just as interesting as the most overpaid. They don't release it because they care more about their agenda than about giving you unbiased information.

_cs2017_ 8y ago

If EA Board could snatch a CEO they like for $5M/year, they would. So why don't they? I'm sure there are thousands of professional managers with solid game industry experience who'd be ecstatic to be offered a CEO position in either company at $5M / year or less. The Board clearly think they are not good enough, and limit their candidate search to people with very special credentials (e.g., those who've served as top executives in large companies, etc.). Such a high bar limits the candidate supply a lot, and then the competition for those candidates between companies drive up the pay (quite similar to NBA or NFL). Why is Board so obsessed with credentials? Is it because they want to play it safe (kinda like dumb execs choose Oracle over open source solutions because they want to protect themselves from criticism by going with a famous brand)? Or is it because those credentials are truly imporant for the success of EA? I don't know for certain but I suspect the answer is kinda in between. The quality of a CEO candidate is really hard to judge. So the Boards think like this: > We'll screen for all the obvious things (experience, references, track record, culture fit, etc.). Hundreds of people will pass that screen. We have no clue of how to choose among them, so we might as well go for someone who's done it before. Perhaps we don't need to be so restrictive. But there's a chance it actually does matter, say maybe 10% chance that a person who's been a top exec before will do better than candidates without such credentials. A good CEO can increase corporate value by billions of dollars over a few years, so even a 10% chance is worth a lot. So let's go bid for one of those bigshot ex-CEOs, even if that means we have to pay an extra $20M/year. So in some sense, high CEO pay is due to the "religious" belief that whoever made it to the top is super good. Maybe this religious belief is actually rational, maybe not. I kinda suspect the latter, since other countries seem to pay CEOs a lot less; I find it unlikely that the US CEOs have such unusually high skill compared to the rest of the world. But I don't have high confidence in my opinion.

eanzenberg 8y ago
This is pretty much the right answer in a sea of nonsense and angry comments here. CEO pay is where it is because those boards believe it’s necessary. If they thought they could pay 5mm instead of 20mm they would in a heartbeat.

evadne 8y ago

Relevant book: The CEO Pay Machine @ https://www.amazon.co.uk/dp/0735212392 https://www.amazon.co.uk/dp/0735212392

system2 8y ago

Why would anyone care about how much CEOs make? It is private industry, if the board or owner wants to pay, CEOs get paid. It is not like they are stealing tax payer's money to pay these people. When the CEOs expire, they are also replaced. It is called business.

perfmode 8y ago
What’s behind the growing ceo to employee income ratio?
- T2_t2 8y ago
  Just some causes that I think are mostly good: 1. Complexity - a change in exchange rates can hurt Netflix's / Google's / Apple's profit, even if all underlying numbers are correct. Guessing exchange rates is a terrifyingly difficult task, and it is just one of many complications 2019 CEOs have over 1969, let alone 1919. 2. Globalisation - rather ironically, if a company employs an extra 10% of people - no one loses their job they just add an extra 10% - the ratio likely gets larger. How is that a BAD thing that more people are employed? Mattel is the most telling in this context ($6,271 average worker salary). IMHO it's a GOOD thing that Mattel directly employs workers, rather than using a, say, Foxconn. But it makes the ratio a lot worse. Obfuscating real worker wages is bad for workers, but good for avoiding ending up on these sorts of reports. 3. Market size - a follow on from 2, if Google makes 50% of it's revenue outside of the USA, what should the ratio relate to? US workers to CEO? Or South African? A lot of these CEOs are multi-country CEOs, and that is a level of difficulty beyond what existed a quarter century ago. 4. Market forces - a law to make CEO pay public means it is signaling something negative when a CEO makes a low ratio, which drives it up. Having public records of salary makes negotiating easier for workers, and CEOs are no different, so it has had a double upwards pressure. Just some things that have made it grow over time.
- Mirioron 8y ago
  These kinds of articles like to play tricks to paint a narrative. Take this paragraph for example: >Yet overall CEO pay continues to increase. According to Institutional Shareholder Services (ISS) the average pay for a CEO in the S&P 500 grew from $11.5 million in 2013 to $13.6 million in 2017. Notice how it says "overall CEO pay" but then goes on to cite statistics for the average CEO of an S&P 500 company? It's a very common tactic whenever CEO compensation is discussed. CEO pay is increasing for these companies though and one reason for it is that these companies are becoming bigger and bigger. This means that a CEO is responsible for more people and companies want more qualified candidates for that. Meanwhile the median employee usually doesn't have additional responsibility compared to the past. Let's look at Walmart and a corner store. The clerk working at Walmart and the clerk working at a corner store roughly have the same responsibilities. On the other hand, the CEO of the corner store is responsible for 5 employees, but the CEO of Walmart is responsible for 2 million employees and this responsibility is growing. Edit: I'm not saying that this explains the entire difference, but it's definitely one part of it.

throway88989898 8y ago

> computes excess CEO pay assuming such pay is related to total shareholder return (TSR) Is this a reasonable assumption?

Flott 8y ago

This is the source cited in the article here https://news.ycombinator.com/item?id=19229502 https://news.ycombinator.com/item?id=19229502 I think the article is interesting enough to have it's own discussion.

dang 8y ago
You're right that that should be the URL. "Please submit the original source. If a post reports on something found on another site, submit the latter." (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html) But it doesn't make sense to have two threads about this on the front page, so we'll merge them. I guess I'll merge the comments from that one into this one as a crude form of karma sharing.

blaze33 8y ago

Somehow related, but what defines a fair salary? Are higher up employees actually bringing more value to their company or somehow extracting it from others? If your pay doesn't match the value of your work, I guess someone logically profits from it?

jjtheblunt 8y ago

I think it's hard to find a more flagrant exploitation of overcompensation than that of Angela Ahrendts at Apple: given something like $70 million to join, quitting 4 years to the week after starting, as if just used Tim Cook's good will to profit, disgusted many of us hardcore engineers when hired that compensation saw someone with no technical history so rewarded.

anderspitman 8y ago

Netflix's median employee salary is ~$180,000? Seems really high. Do they have a non-traditional org chart?

discobean 8y ago

TIL I need to work @ netflix

dandare 8y ago

Technical comment: the table in the article is not scrollable nor zoomable on my Galaxy s6, I can see only the leftmost digit of the CEO salary. Quite a bummer in 2019.

choppaface 8y ago

This list appears to be missing the CEOs of banks. People like Jamie Dimon who profited from the financial crisis should probably be on this list for life.