8 ms·

It’s Never Been Easier to Be a CEO, and the Pay Keeps Rising

64 points by wintercarver 7y ago

deleted 7y ago
[deleted]
lacker 7y ago
If it's never been easier to be a CEO, perhaps the author should consider it. It's the easiest job title to legitimately acquire. You just need to pay a few hundred bucks to incorporate in Delaware, and boom, you're a CEO.
- tareqak 7y ago
  Hi 'lacker, I detected a note of sarcasm in your response, but I don't have sufficient context to decipher its meaning myself. Given that you were a founder for two YC companies as it says in your HN profile, could you please explain what you are implying? I skimmed the article: it gives pretty good details on the arguments that it is trying to make. The one thing I would change would be the headline to read "It’s Never Been Easier to Be a Fortune 500 / Unicorn C.E.O., and the Pay Keeps Rising" to reflect the specific kind of CEO that the article author talks about.
  - astrea 7y ago
    I think they're rather offended by the diminishing title (although I personally didn't read it that way).
minikites 7y ago
Once you get to a certain level of success in the business world, you can't fail. CEOs who run a business into the ground easily find work leading other companies. CEOs who commit crimes almost never get punished. There's a serious issue with "moral hazard" because they can't fail or be punished.
- justfor1comment 7y ago
  .. and even if they are punished the fine is usually so small that they can commit the same crime a few hundred times and still won't run out of money.
- ThrowawayR2 7y ago
  > Once you get to a certain level of success in the business world, you can't fail. How are Scott McNealy, Carly Fiorina, and Don Mattrick doing these days? /s
  - deleted 7y ago
    [deleted]
  - tzakrajs 7y ago
    Two of those people are billionaires and the Carly Fiorina is also incredibly rich ($50-60 mil) after departing HP.
    - Sohcahtoa82 7y ago
      Not to mention a presidential campaign where she peaked at 15% at the polls. While a low number for sure, it's still a significant figure when there were so many candidates at the time.
    - Zimahl 7y ago
      Fiorina also ran for president and she used her experience at HP as a talking point for how she was a good candidate. It boggles the mind.
    - ThrowawayR2 7y ago
      And none of them have been been CEO of anything significant since their screw-ups. Sure sounds like failure to me.
      - deleted 7y ago
        [deleted]
reasonablemann 7y ago
There's no way CEOs deserve the pay they get. They cannot be that much better than the other management. Shareholders are fleeced.
- crimsonalucard 7y ago
  The CEO job is hard. To get to the position they're in they need to be expert "fleecers." Not just anyone can convince shareholders that one person has the work output of 20 engineers and therefore deserves equivalent pay. You need to have skills that no one else has: the ability to manipulate.
  - mdorazio 7y ago
    While I kind of agree to a degree, work output =\= value. Great managers have less work output than a single engineer, but can easily provide far more value as a whole in terms of removing roadblocks, protecting time, keeping work focused on concrete goals, etc. The same can be true at the senior leadership level as well where setting the company on the right path, executing large deals, securing new markets, etc. can easily create more overall value for the company than any one or even ten engineers.
    - anigbrowl 7y ago
      GP was making that point sarcastically.
    - jbay808 7y ago
      An engineer's pay is bounded by, but not determined by, the value of what they produce. That is why even when an engineer produces a million dollar breakthrough, they don't get a million dollar bonus. Instead, their pay is determined based on their replacement value -- how much the company would have to pay to get another engineer of comparable skill, if the first one should leave. If it is hard to find a comparable replacement, then their pay is also determined by the absolute value increase they bring relative to a less-skilled replacement. This isn't strictly true at all times but it's the guiding principle. A CEO can likewise make decisions with billion dollar impact. But their pay should not be determined by the value of their decision-making, but rather by the price at which others would step up to take on that role, and by how much more valuable the current CEO's decisions than those that a replacement would make. I don't personally understand why there isn't a huge pool of skilled would-be CEOs willing to run companies for a fraction of the pay of current CEOs. Probably because CEO experience is so hard to come by. The rewards are so high though that you'd think there would be more CEO boot camps. But I guess the risk of a bad CEO (whose bad decisions could sink the whole company) are considered high enough that a real track record is considered nearly priceless, and it also has huge barriers to entry.
gervase 7y ago
I feel like it's a little disingenuous to list unexercised stock and option grants as part of the overall compensation, since these are directly related to the future performance of the company itself (as led by the listed CEO, presumably). I would have liked to see the option to differentiate between total compensation more granularly, including by exercised grants. I understand that that "2.3 billion" number makes for shocking value and therefore a great headline, supporting the narrative that they're looking to construct, but the way the raw data is presented actively obfuscates readers from exploring the data and forming their own interpretations. When I see a dataset with a 4 million percent increase YOY, I would probably classify that as an outlier, not as the representative value I report for the whole dataset. Edit: That's not to say their narrative is wrong (that is, CEOs may absolutely be overpaid), just that the way they presented it feels misleading to me.
- iaabtpbtpnn 7y ago
  The difference here is realized vs. realizable pay: http://www.execcomp.org/Issues/Issue/pay-for-performance/realizable-pay http://www.execcomp.org/Issues/Issue/pay-for-performance/rea.... The realizable number is more often used when comparing to peer companies. The reason is not generally to get larger numbers for headlines. But indeed, as you say: "One drawback of realizable pay is that because it combines actual pay with a current snapshot of future incentive pay, it may differ significantly from the comparison of pay actually received at the end of the performance period to the performance over that period."
- Sohcahtoa82 7y ago
  Agreed. On a similar note, I bring thing this kind of thing up whenever people talk about how much money Jeff Bezos has. While Bezos has a lot of cash for sure, he doesn't have $160B like news headlines make it out to be. Most of his "money" is tied up in stocks, and if he were to try to cash out all of it, it would tank the stock prices pretty hard, and he'd only get a fraction of it.
  - paxys 7y ago
    No one is saying Bezos has $160B in cash. At that level liquid cash doesn't really matter anyways, since there's no way you could even spend that much. What he does have, though, is $160B worth of influence, a large part of which comes from the money tied up in stocks.
iscrewyou 7y ago
CEOs should be able to get paid how much ever the company/the board/the stock holders are ok with paying them. No limit. BUT that pay should be linked to the pay of everyone else in the company: the average pay or the minimum pay or whatever have you. I think the point gets lost in the fairness. It’s fair to pay them more for their hard work. But it’s not fair to pay the CEO enormous sums while the employees struggle.
- Buttons840 7y ago
  > No limit. I've seen a lot of talk about hard limits online recently, I don't like it. A very high tax rate for the extremely rich I am much more OK with. 75 to 95 percent of income above 10 million seems fine. I wouldn't even tax stock holding. Let people sell 10 million in stock each year and avoid the high tax, nobody will struggle on 10 million a year. And if their money is still growing like crazy in the stock market, fine, tax it when it comes out.
  - holy_city 7y ago
    >A very high tax rate for the extremely rich I am much more OK with. Let's get rid of the 15% cap on "long term" capital gains first. A dollar earned is a dollar taxed, no matter where it comes from.
  - uxp100 7y ago
    This has a kind of weird, not necessarily bad effect. Since the main way this changes the CEOs life is their relationship to capital. With income "caps," you no longer own a private jet, but you still fly on one. The company hires your chauffeur, owns your vacation home, owns your private jet, hires your personal assistant, hires your other, more personal assistant, pays for your chef and maid, etc. CEOs still live a life of luxury, but they are unable to acquire massive capital. If software engineers are labor aristocrats, CEOs become labor space emperors. It definitely is more of an "east-coast" style of wealth, the kind of thing that shocked the "Traitorus Eight" when they were working with east coast finance to found Fairchild (if I'm remembering my history correctly.) But high marginal tax rates on the super rich were in effect at that time and they didn't understand the alternative either.
briandear 7y ago
Why is CEO pay the business of anyone except the Board of Directors? Why don’t we critique successful actors or athletes for their high pay? The cast of Friends made a million dollars per episode. And they didn’t even make decisions, they literally read lines and made facial expressions at appropriate moments. Certainly the editor and camera operators worked “harder.”
- iaabtpbtpnn 7y ago
  It's certainly the business of investors, who vote to approve executive compensation (so-called "Say-on-Pay" votes) each year. While the vote is non-binding, it helps provide a signal to companies when investors are displeased with executive performance.
- nknealk 7y ago
  In the same line of thinking -- If the board thought they could hire an equally competent CEO to lead the company for half the price, they would do so.
- rubyn00bie 7y ago
  It's the business of the shareholders first and foremost. The board of directors and CEO have ZERO reason to think anything related to executive compensation won't be made public. If the company is public, then the company has the obligation to truthfully and accurately represent itself to prospective shareholders (who can be anyone, i.e. "the public"). CEO is a very different role than athlete or actor, from responsibility to elasticity of demand for their labor and I think comparing the two is a false-dichotomy. Edit: What you're bringing up is actually one of the cruxes of our problems here in America, management no longer owns any significant portion of the company they manage. There is almost zero incentive to behave in a way that promotes long-term success; instead, it's better to optimize for quarterly returns so you hit your bonuses and eventually move on leaving all the shit to the next person. When ownership of a business has no power over its management, bad things happen.
legitster 7y ago
Is there any reason we aren't taxing capital gains at the same rate as income?
- tathougies 7y ago
  Because it was already taxed at the same rate as income when it was earned as profit by the company. Taxing it again when its realized means it was taxed once when the corporation earned it, and then again when the individual stock holder realized it. Now you may think that's how it should, but that issue of double taxation is why capital gains tax is less than income tax. An alternative is to 'flip' the tax. Tax companies at the rate of capital gains, and investors at their tax bracket 'normal' rate. This also leaves more capital for companies to reinvest.
effnorwood 7y ago
IYI
rayssgyms 7y ago
Before jumping to the conclusion that the author is hoping you jump to, question: is it possible that he, you, and I don’t have a full view of the rare personality traits and skills that are required to be an effective Fortune 50 CEO? I assume most of us here are in favor for exchanging money for value (versus time contributed)? Correct? Otherwise, how is a $200k SW engineer’s salary justifiable compared to a $30k fast food worker’s? In the same 40 hour work week? I do take issue with non-founding CEOs [sometimes] having no skin in the game. I saw this when I was at BlackBerry. Win or lose, the CEO that replaced the founders would win. BlackBerry lost, he didn’t. This seems like a misalignment of incentives, but that’s up to the company to address, not me, and hopefully not the government. If the company gets the incentives wrong, they lose, and hopefully we learn. Back to the point: if a company has an impact on billions of dollars and millions of lives, I’d prefer their leader be paid well. But my preference is irrelevant here because a company can and should decide how to value that person’s role. In contrast, I certainly wouldn’t want a government policy (and it’s guaranteed slew of unintended consequences) regulating how much a chief executive is paid. Being an effective CEO is anything but easy. And the combination of an effective CEO’s skills and experience are extraordinarily rare. It’s not a surprise that the market prices their value accordingly.
11thEarlOfMar 7y ago
I'd like to see a little balance in this piece. Author includes no input from the CEOs and no evidence of the ease of the job. It's essentially a listing of the compensation of a variety of high-paid CEOs. Moreover, the median CEO pay in the US is $160k [0]. Perhaps there's a little confirmation bias in this article. [0] https://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary https://www.payscale.com/research/US/Job=Chief_Executive_Off...

64 points by wintercarver 7y ago

deleted 7y ago

[deleted]

If it's never been easier to be a CEO, perhaps the author should consider it. It's the easiest job title to legitimately acquire. You just need to pay a few hundred bucks to incorporate in Delaware, and boom, you're a CEO.

tareqak 7y ago
Hi 'lacker, I detected a note of sarcasm in your response, but I don't have sufficient context to decipher its meaning myself. Given that you were a founder for two YC companies as it says in your HN profile, could you please explain what you are implying? I skimmed the article: it gives pretty good details on the arguments that it is trying to make. The one thing I would change would be the headline to read "It’s Never Been Easier to Be a Fortune 500 / Unicorn C.E.O., and the Pay Keeps Rising" to reflect the specific kind of CEO that the article author talks about.
- astrea 7y ago
  I think they're rather offended by the diminishing title (although I personally didn't read it that way).

minikites 7y ago

Once you get to a certain level of success in the business world, you can't fail. CEOs who run a business into the ground easily find work leading other companies. CEOs who commit crimes almost never get punished. There's a serious issue with "moral hazard" because they can't fail or be punished.

justfor1comment 7y ago
.. and even if they are punished the fine is usually so small that they can commit the same crime a few hundred times and still won't run out of money.
ThrowawayR2 7y ago
> Once you get to a certain level of success in the business world, you can't fail. How are Scott McNealy, Carly Fiorina, and Don Mattrick doing these days? /s
- deleted 7y ago
  [deleted]
- tzakrajs 7y ago
  Two of those people are billionaires and the Carly Fiorina is also incredibly rich ($50-60 mil) after departing HP.
  - Sohcahtoa82 7y ago
    Not to mention a presidential campaign where she peaked at 15% at the polls. While a low number for sure, it's still a significant figure when there were so many candidates at the time.
  - Zimahl 7y ago
    Fiorina also ran for president and she used her experience at HP as a talking point for how she was a good candidate. It boggles the mind.
  - ThrowawayR2 7y ago
    And none of them have been been CEO of anything significant since their screw-ups. Sure sounds like failure to me.
    - deleted 7y ago
      [deleted]

reasonablemann 7y ago

There's no way CEOs deserve the pay they get. They cannot be that much better than the other management. Shareholders are fleeced.

crimsonalucard 7y ago
The CEO job is hard. To get to the position they're in they need to be expert "fleecers." Not just anyone can convince shareholders that one person has the work output of 20 engineers and therefore deserves equivalent pay. You need to have skills that no one else has: the ability to manipulate.
- mdorazio 7y ago
  While I kind of agree to a degree, work output =\= value. Great managers have less work output than a single engineer, but can easily provide far more value as a whole in terms of removing roadblocks, protecting time, keeping work focused on concrete goals, etc. The same can be true at the senior leadership level as well where setting the company on the right path, executing large deals, securing new markets, etc. can easily create more overall value for the company than any one or even ten engineers.
  - anigbrowl 7y ago
    GP was making that point sarcastically.
  - jbay808 7y ago
    An engineer's pay is bounded by, but not determined by, the value of what they produce. That is why even when an engineer produces a million dollar breakthrough, they don't get a million dollar bonus. Instead, their pay is determined based on their replacement value -- how much the company would have to pay to get another engineer of comparable skill, if the first one should leave. If it is hard to find a comparable replacement, then their pay is also determined by the absolute value increase they bring relative to a less-skilled replacement. This isn't strictly true at all times but it's the guiding principle. A CEO can likewise make decisions with billion dollar impact. But their pay should not be determined by the value of their decision-making, but rather by the price at which others would step up to take on that role, and by how much more valuable the current CEO's decisions than those that a replacement would make. I don't personally understand why there isn't a huge pool of skilled would-be CEOs willing to run companies for a fraction of the pay of current CEOs. Probably because CEO experience is so hard to come by. The rewards are so high though that you'd think there would be more CEO boot camps. But I guess the risk of a bad CEO (whose bad decisions could sink the whole company) are considered high enough that a real track record is considered nearly priceless, and it also has huge barriers to entry.

gervase 7y ago

I feel like it's a little disingenuous to list unexercised stock and option grants as part of the overall compensation, since these are directly related to the future performance of the company itself (as led by the listed CEO, presumably). I would have liked to see the option to differentiate between total compensation more granularly, including by exercised grants. I understand that that "2.3 billion" number makes for shocking value and therefore a great headline, supporting the narrative that they're looking to construct, but the way the raw data is presented actively obfuscates readers from exploring the data and forming their own interpretations. When I see a dataset with a 4 million percent increase YOY, I would probably classify that as an outlier, not as the representative value I report for the whole dataset. Edit: That's not to say their narrative is wrong (that is, CEOs may absolutely be overpaid), just that the way they presented it feels misleading to me.

iaabtpbtpnn 7y ago
The difference here is realized vs. realizable pay: http://www.execcomp.org/Issues/Issue/pay-for-performance/realizable-pay http://www.execcomp.org/Issues/Issue/pay-for-performance/rea.... The realizable number is more often used when comparing to peer companies. The reason is not generally to get larger numbers for headlines. But indeed, as you say: "One drawback of realizable pay is that because it combines actual pay with a current snapshot of future incentive pay, it may differ significantly from the comparison of pay actually received at the end of the performance period to the performance over that period."
Sohcahtoa82 7y ago
Agreed. On a similar note, I bring thing this kind of thing up whenever people talk about how much money Jeff Bezos has. While Bezos has a lot of cash for sure, he doesn't have $160B like news headlines make it out to be. Most of his "money" is tied up in stocks, and if he were to try to cash out all of it, it would tank the stock prices pretty hard, and he'd only get a fraction of it.
- paxys 7y ago
  No one is saying Bezos has $160B in cash. At that level liquid cash doesn't really matter anyways, since there's no way you could even spend that much. What he does have, though, is $160B worth of influence, a large part of which comes from the money tied up in stocks.

iscrewyou 7y ago

CEOs should be able to get paid how much ever the company/the board/the stock holders are ok with paying them. No limit. BUT that pay should be linked to the pay of everyone else in the company: the average pay or the minimum pay or whatever have you. I think the point gets lost in the fairness. It’s fair to pay them more for their hard work. But it’s not fair to pay the CEO enormous sums while the employees struggle.

Buttons840 7y ago
> No limit. I've seen a lot of talk about hard limits online recently, I don't like it. A very high tax rate for the extremely rich I am much more OK with. 75 to 95 percent of income above 10 million seems fine. I wouldn't even tax stock holding. Let people sell 10 million in stock each year and avoid the high tax, nobody will struggle on 10 million a year. And if their money is still growing like crazy in the stock market, fine, tax it when it comes out.
- holy_city 7y ago
  >A very high tax rate for the extremely rich I am much more OK with. Let's get rid of the 15% cap on "long term" capital gains first. A dollar earned is a dollar taxed, no matter where it comes from.
- uxp100 7y ago
  This has a kind of weird, not necessarily bad effect. Since the main way this changes the CEOs life is their relationship to capital. With income "caps," you no longer own a private jet, but you still fly on one. The company hires your chauffeur, owns your vacation home, owns your private jet, hires your personal assistant, hires your other, more personal assistant, pays for your chef and maid, etc. CEOs still live a life of luxury, but they are unable to acquire massive capital. If software engineers are labor aristocrats, CEOs become labor space emperors. It definitely is more of an "east-coast" style of wealth, the kind of thing that shocked the "Traitorus Eight" when they were working with east coast finance to found Fairchild (if I'm remembering my history correctly.) But high marginal tax rates on the super rich were in effect at that time and they didn't understand the alternative either.

briandear 7y ago

Why is CEO pay the business of anyone except the Board of Directors? Why don’t we critique successful actors or athletes for their high pay? The cast of Friends made a million dollars per episode. And they didn’t even make decisions, they literally read lines and made facial expressions at appropriate moments. Certainly the editor and camera operators worked “harder.”

iaabtpbtpnn 7y ago
It's certainly the business of investors, who vote to approve executive compensation (so-called "Say-on-Pay" votes) each year. While the vote is non-binding, it helps provide a signal to companies when investors are displeased with executive performance.
nknealk 7y ago
In the same line of thinking -- If the board thought they could hire an equally competent CEO to lead the company for half the price, they would do so.
rubyn00bie 7y ago
It's the business of the shareholders first and foremost. The board of directors and CEO have ZERO reason to think anything related to executive compensation won't be made public. If the company is public, then the company has the obligation to truthfully and accurately represent itself to prospective shareholders (who can be anyone, i.e. "the public"). CEO is a very different role than athlete or actor, from responsibility to elasticity of demand for their labor and I think comparing the two is a false-dichotomy. Edit: What you're bringing up is actually one of the cruxes of our problems here in America, management no longer owns any significant portion of the company they manage. There is almost zero incentive to behave in a way that promotes long-term success; instead, it's better to optimize for quarterly returns so you hit your bonuses and eventually move on leaving all the shit to the next person. When ownership of a business has no power over its management, bad things happen.

legitster 7y ago

Is there any reason we aren't taxing capital gains at the same rate as income?

tathougies 7y ago
Because it was already taxed at the same rate as income when it was earned as profit by the company. Taxing it again when its realized means it was taxed once when the corporation earned it, and then again when the individual stock holder realized it. Now you may think that's how it should, but that issue of double taxation is why capital gains tax is less than income tax. An alternative is to 'flip' the tax. Tax companies at the rate of capital gains, and investors at their tax bracket 'normal' rate. This also leaves more capital for companies to reinvest.

effnorwood 7y ago

IYI

rayssgyms 7y ago

Before jumping to the conclusion that the author is hoping you jump to, question: is it possible that he, you, and I don’t have a full view of the rare personality traits and skills that are required to be an effective Fortune 50 CEO? I assume most of us here are in favor for exchanging money for value (versus time contributed)? Correct? Otherwise, how is a $200k SW engineer’s salary justifiable compared to a $30k fast food worker’s? In the same 40 hour work week? I do take issue with non-founding CEOs [sometimes] having no skin in the game. I saw this when I was at BlackBerry. Win or lose, the CEO that replaced the founders would win. BlackBerry lost, he didn’t. This seems like a misalignment of incentives, but that’s up to the company to address, not me, and hopefully not the government. If the company gets the incentives wrong, they lose, and hopefully we learn. Back to the point: if a company has an impact on billions of dollars and millions of lives, I’d prefer their leader be paid well. But my preference is irrelevant here because a company can and should decide how to value that person’s role. In contrast, I certainly wouldn’t want a government policy (and it’s guaranteed slew of unintended consequences) regulating how much a chief executive is paid. Being an effective CEO is anything but easy. And the combination of an effective CEO’s skills and experience are extraordinarily rare. It’s not a surprise that the market prices their value accordingly.

11thEarlOfMar 7y ago

I'd like to see a little balance in this piece. Author includes no input from the CEOs and no evidence of the ease of the job. It's essentially a listing of the compensation of a variety of high-paid CEOs. Moreover, the median CEO pay in the US is $160k [0]. Perhaps there's a little confirmation bias in this article. [0] https://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary https://www.payscale.com/research/US/Job=Chief_Executive_Off...