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There is no question that executives do important stuff in the company. I've observed on several occasions their decisions that almost failed the company and th

by Yizahi 7y ago

There is no question that executives do important stuff in the company. I've observed on several occasions their decisions that almost failed the company and the ones that succeeded and almost decimated much more experienced and rich competitors. The questions is - should they be payed x50 to x500 of the median yearly wage of the regular and senior staff in their own company? Their work may be x50 more important (debatable but possible) but it is definitely not x50 times harder, it is not even x10 times harder, it is at most x2-x3 times harder and slightly different. Question number 2 is - should they have almost complete financial and reputational immunity for their "bad" actions and decisions? (unlike regular staff)

mhluongo 7y ago
Should athletes be so well paid? How about musicians? Construction work is much harder than office work, maybe 2-3x. Should office workers be paid less, or construction workers more? Whether something is "harder" has very little to do with compensation in a market-driven economy.
- jononor 7y ago
  Majority of athletes and musicians are paid extremely little, if anything at all. It is only the top 0.1% that takes home serious money.
  - hirako2000 7y ago
    Spot on. And excutives are the 0.1% of the staff. They climbed up to the top levels of responsibility. Whether they bullshited their way through is another story. But I do see some artists who climbed their way to the top selling charts, with little artistic talent. Why people buy the bullshit from imposters, whether them be artists or executives, that is an interesting question.
    - jorvi 7y ago
      > Spot on. And excutives are the 0.1% of the staff. They climbed up to the top levels of responsibility. I think you meant top levels of decision making. Executives rarely deal with the fall-out of bad decisions. Management and normal workers get axed, executives get a golden parachute and a cushy board job at another company from one of their fellow executives. In other words, they carry zero consequences and thus zero responsibility for their actions.
      - tomnipotent 7y ago
        > Executives rarely deal with the fall-out of bad decisions This is a fantasy. Executives come-and-go at the same cadence as regular employees as a % of staff. Look at any exec on LinkedIn and you'll see the same 18-36 month stints as everyone else.
        Yizahi 7y ago
        Yes, they come and go, by their own decision. For promotions, bigger salaries and other reasons. How many executives were actually fired for underperforming? What is even underperforming for that type of job?
        tomnipotent 7y ago
        > by their own decision Another fantasy. Plenty of execs are fired, it's just handled differently at that level. > How many executives were actually fired for underperforming? A lot. > What is even underperforming for that type of job? Poor performance, just like anyone else that's fired.
    - tomnipotent 7y ago
      They're actually the top 1.5-2%, at least in the US. There are roughly ~170M working folk of which an estimated 2.5-3M are "top executives".
      - AdrianB1 7y ago
        Executives of small companies should not be counted, I really doubt they are paid as much as the rest of the company if the entire company is 200 people. For big companies of over 10,000 people there are not enough companies to have that many top executives.
        tomnipotent 7y ago
        > as the rest of the company if the entire company is 200 people It's easy to confuse income with capital and earning potential. There are no shortage of well-off restaurant owners or other small-business owners with < 200 employees - I run into no shortage of them in Los Angeles. Thomas Keller, Gordon Ramsey, and their less-known partners make a lot more than their staff. It may not manifest in 1000x annual pay, but it definitely manifests as 1000x quality of life thanks to the magic of compound interest and financial leverage. Being a capitalist puts you in an entirely different game - salaried or hourly employees are not capitalist, they're labor. This makes a big difference to banks and other money lenders, further giving leverage for future earnings potential.
  - tomnipotent 7y ago
    > Majority of athletes The average salary/income for any major league sport puts all of them in the top 1-2%. Baseball min is around $500k, NBA is around $480k.
    - mamon 7y ago
      How many basketball players never make it to NBA? Major leagues are elitte, there are thousands of players at lower levels.
      - tomnipotent 7y ago
        If we're comparing executives at top companies vs. not, it's a fair comparison. Most executives don't make it into the "big league", and those that do are paid pretty much like their pro athlete counterparts. In the U.S., the NFL is in the $16-25bn in annual revenues; NBA is ~$3-5bn; MLB ~ $11bn. Think about how well players are paid relative % of revenues. Google is at $110bn. Microsoft $125bn. Apple ~$258bn. There are "pro executives" that pull in big paychecks because, just like their pro athlete counterparts, they make a difference. We just don't get to watch them at work and score their every move with easy-to-track-stats. No one bats an eye when a pro athlete is paid $10m+ (besides other pro athletes).
  - AdrianB1 7y ago
    It is not the point of the argument, but the "pay 50x". The top 0.1% of the athletes that take home serious money (50x more than average, let's say) don't work (train) 50 times harder, they are just successful at what they do; they are paid for success, not for the effort.
- specialist 7y ago
  Wrong analogy. Athletes don't own, shepherd the capital. For sports, that'd be the owners, GMs, etc. Athletes are more akin to superstar sales persons. Many sales persons are pretty good. Some are amazing.
- deleted 7y ago
  [deleted]
moksly 7y ago
I think we’d get further if we asked, “should employees be paid so little”. Extreme inequality isn’t healthy for a free society, but paying CEOs less isn’t going to help people who are living pay check to pay check.
- merpnderp 7y ago
  A better question is why are they paid so little. Right now that’s mostly supply and demand.
  - arbitrarylimit 7y ago
    Why doesn't supply and demand drive down executive income then? Surely we don't believe the supply of potential executives is so limited.
    - rat9988 7y ago
      There is definitely a shortage of proven executives.
      - ativzzz 7y ago
        Can we even define what a "proven" executive is? > There is almost no persistence in CEO performance [1] Meaning that a successful performance as a CEO does not indicate that future stints will be successful. [1]: https://www.institutionalinvestor.com/article/b1db3jy3201d38/The-MBA-Myth-and-the-Cult-of-the-CEO https://www.institutionalinvestor.com/article/b1db3jy3201d38...
    - AdrianB1 7y ago
      In a large company where a top executive earns over a million dollars per year you have multiple levels of managers, directors, VP's. They all earn more than the lower level, from 20-30% to double that, otherwise there is no incentive go invest all that time and effort in a career for a 5% increase. That means the top executives need to be paid more than the people below them, that makes it quite a high starting point. Yes, paying executives more than 10 million a year is probably too much, but the number of such position is quite small and there is still the benchmarking: you cannot offer a CEO of a top 25 Fortune 500 company the same package as the CEOs of the bottom 25 in the same list. Running successfully a larger company should be rewarded better, at least in theory.
nvarsj 7y ago
The risk and reward of hiring the wrong CEO is way, way higher than a single engineer. Combine that with supply and demand to try and hire the best exec, and it's not hard to see why exec comp can get very high. It might not feel "fair" but this is capitalism and the market pays for value not how hard you toil in the field. > should they have almost complete financial and reputational immunity for their "bad" actions and decisions? (unlike regular staff) Do they? Bad execs should be fired by the company's board. If the board is not doing a good job there, the business is bound to fail spectacularly. Also, execs at public companies tend to be public officers - their reputation is very much on public display. They are taking a big risk personally compared to a typical staff member. Maybe not so much financially - but they are employees, not founders.
- ryandrake 7y ago
  Can you elaborate on the risk you think they are taking? If they lose their job, well, they spend a little quality time with their money then move on to some other multimillion dollar job. They were a senior executive at one company so they can go be a senior exec at any other company. If I get fired, I panic as I blow through my savings and take whatever job I can get. I find that scenario to be a lot more of a risk.
- MereInterest 7y ago
  > They are taking a big risk personally compared to a typical staff member. Negative effect of a failed CEO: $25M in severance pay [1]. Roughly 10-12 times the lifetime earnings of a college graduate [2]. When the cost of failure is to have enough income to live very comfortable for the rest of their lives, that is not a large cost. Negative effect on employees: needing to find a new job, move to a new location, start a new social life, and that is all assuming that there is the recommended 3-6 month emergency fund. When 40% of US adults would be underwater from an unexpected $400 bill [3], this adds debt and uncertainty to be able to start up again. [1] https://www.beckershospitalreview.com/compensation-issues/healthcare-ceos-see-25m-golden-parachute-on-average-5-things-to-know.html https://www.beckershospitalreview.com/compensation-issues/he... [2] https://www.ssa.gov/policy/docs/research-summaries/education-earnings.html https://www.ssa.gov/policy/docs/research-summaries/education... [3] https://www.fool.com/retirement/2018/05/23/guess-how-many-americans-couldnt-cover-a-400-emerg.aspx https://www.fool.com/retirement/2018/05/23/guess-how-many-am...
analog31 7y ago
They should take as much money as they can grab, just like the rest of us. If inequality is a problem, I think it's better to address it through taxation than through wage fixing.
- leetcrew 7y ago
  this might be the only realistic way of solving the immediate problem, but I don't find it very satisfying. I don't believe people like mark zuckerberg have actually created billions of dollars of value themselves. it does require hard work, skill, and a bit of luck to get that initial advantage, but then the few people that find themselves in this position are able to ride network effects all the way to the top, basically exploiting a market failure. imo, the ideal society is the opposite of what you said: people who do "useful" stuff should get to keep most of the value they create, and there should be mild restributive programs to ease the burdens of people who can't really contribute. definitely not realistic, but this is the ideal I think we should shoot for. the team of researchers who cure cancer should be worth more than guys like zucc. note: I don't mean to single out zucc; I just think Facebook is a good example of a valuable company that hasn't improved the world.
  - anon1m0us 7y ago
    Why should the tax payers subsidize Zuck's income? Imagine facebook has a $100 million profit. If it pays that to Zuck, the company then makes NO profit and pays no tax. Zuck pays income tax on it, but it's not double taxed through the corporation. Thus, the tax payers are subsidizing Zuck's income.
    - leetcrew 7y ago
      I'm suggesting that in a society where only people who do useful things get rich, owners of businesses that have attained most of their value through exploiting network effects will not be extremely wealthy.
iamgopal 7y ago
I have to deal with middle and top tier executives in many sufficient big companies, if not fortune 500, most of them are quite responsible and efficient in the work they do.

by Yizahi 7y ago

mhluongo 7y ago

Should athletes be so well paid? How about musicians? Construction work is much harder than office work, maybe 2-3x. Should office workers be paid less, or construction workers more? Whether something is "harder" has very little to do with compensation in a market-driven economy.

jononor 7y ago
Majority of athletes and musicians are paid extremely little, if anything at all. It is only the top 0.1% that takes home serious money.
- hirako2000 7y ago
  Spot on. And excutives are the 0.1% of the staff. They climbed up to the top levels of responsibility. Whether they bullshited their way through is another story. But I do see some artists who climbed their way to the top selling charts, with little artistic talent. Why people buy the bullshit from imposters, whether them be artists or executives, that is an interesting question.
  - jorvi 7y ago
    > Spot on. And excutives are the 0.1% of the staff. They climbed up to the top levels of responsibility. I think you meant top levels of decision making. Executives rarely deal with the fall-out of bad decisions. Management and normal workers get axed, executives get a golden parachute and a cushy board job at another company from one of their fellow executives. In other words, they carry zero consequences and thus zero responsibility for their actions.
    - tomnipotent 7y ago
      > Executives rarely deal with the fall-out of bad decisions This is a fantasy. Executives come-and-go at the same cadence as regular employees as a % of staff. Look at any exec on LinkedIn and you'll see the same 18-36 month stints as everyone else.
      - Yizahi 7y ago
        Yes, they come and go, by their own decision. For promotions, bigger salaries and other reasons. How many executives were actually fired for underperforming? What is even underperforming for that type of job?
        tomnipotent 7y ago
        > by their own decision Another fantasy. Plenty of execs are fired, it's just handled differently at that level. > How many executives were actually fired for underperforming? A lot. > What is even underperforming for that type of job? Poor performance, just like anyone else that's fired.
  - tomnipotent 7y ago
    They're actually the top 1.5-2%, at least in the US. There are roughly ~170M working folk of which an estimated 2.5-3M are "top executives".
    - AdrianB1 7y ago
      Executives of small companies should not be counted, I really doubt they are paid as much as the rest of the company if the entire company is 200 people. For big companies of over 10,000 people there are not enough companies to have that many top executives.
      - tomnipotent 7y ago
        > as the rest of the company if the entire company is 200 people It's easy to confuse income with capital and earning potential. There are no shortage of well-off restaurant owners or other small-business owners with < 200 employees - I run into no shortage of them in Los Angeles. Thomas Keller, Gordon Ramsey, and their less-known partners make a lot more than their staff. It may not manifest in 1000x annual pay, but it definitely manifests as 1000x quality of life thanks to the magic of compound interest and financial leverage. Being a capitalist puts you in an entirely different game - salaried or hourly employees are not capitalist, they're labor. This makes a big difference to banks and other money lenders, further giving leverage for future earnings potential.
- tomnipotent 7y ago
  > Majority of athletes The average salary/income for any major league sport puts all of them in the top 1-2%. Baseball min is around $500k, NBA is around $480k.
  - mamon 7y ago
    How many basketball players never make it to NBA? Major leagues are elitte, there are thousands of players at lower levels.
    - tomnipotent 7y ago
      If we're comparing executives at top companies vs. not, it's a fair comparison. Most executives don't make it into the "big league", and those that do are paid pretty much like their pro athlete counterparts. In the U.S., the NFL is in the $16-25bn in annual revenues; NBA is ~$3-5bn; MLB ~ $11bn. Think about how well players are paid relative % of revenues. Google is at $110bn. Microsoft $125bn. Apple ~$258bn. There are "pro executives" that pull in big paychecks because, just like their pro athlete counterparts, they make a difference. We just don't get to watch them at work and score their every move with easy-to-track-stats. No one bats an eye when a pro athlete is paid $10m+ (besides other pro athletes).
- AdrianB1 7y ago
  It is not the point of the argument, but the "pay 50x". The top 0.1% of the athletes that take home serious money (50x more than average, let's say) don't work (train) 50 times harder, they are just successful at what they do; they are paid for success, not for the effort.
specialist 7y ago
Wrong analogy. Athletes don't own, shepherd the capital. For sports, that'd be the owners, GMs, etc. Athletes are more akin to superstar sales persons. Many sales persons are pretty good. Some are amazing.
deleted 7y ago
[deleted]

moksly 7y ago

I think we’d get further if we asked, “should employees be paid so little”. Extreme inequality isn’t healthy for a free society, but paying CEOs less isn’t going to help people who are living pay check to pay check.

merpnderp 7y ago
A better question is why are they paid so little. Right now that’s mostly supply and demand.
- arbitrarylimit 7y ago
  Why doesn't supply and demand drive down executive income then? Surely we don't believe the supply of potential executives is so limited.
  - rat9988 7y ago
    There is definitely a shortage of proven executives.
    - ativzzz 7y ago
      Can we even define what a "proven" executive is? > There is almost no persistence in CEO performance [1] Meaning that a successful performance as a CEO does not indicate that future stints will be successful. [1]: https://www.institutionalinvestor.com/article/b1db3jy3201d38/The-MBA-Myth-and-the-Cult-of-the-CEO https://www.institutionalinvestor.com/article/b1db3jy3201d38...
  - AdrianB1 7y ago
    In a large company where a top executive earns over a million dollars per year you have multiple levels of managers, directors, VP's. They all earn more than the lower level, from 20-30% to double that, otherwise there is no incentive go invest all that time and effort in a career for a 5% increase. That means the top executives need to be paid more than the people below them, that makes it quite a high starting point. Yes, paying executives more than 10 million a year is probably too much, but the number of such position is quite small and there is still the benchmarking: you cannot offer a CEO of a top 25 Fortune 500 company the same package as the CEOs of the bottom 25 in the same list. Running successfully a larger company should be rewarded better, at least in theory.

nvarsj 7y ago

The risk and reward of hiring the wrong CEO is way, way higher than a single engineer. Combine that with supply and demand to try and hire the best exec, and it's not hard to see why exec comp can get very high. It might not feel "fair" but this is capitalism and the market pays for value not how hard you toil in the field. > should they have almost complete financial and reputational immunity for their "bad" actions and decisions? (unlike regular staff) Do they? Bad execs should be fired by the company's board. If the board is not doing a good job there, the business is bound to fail spectacularly. Also, execs at public companies tend to be public officers - their reputation is very much on public display. They are taking a big risk personally compared to a typical staff member. Maybe not so much financially - but they are employees, not founders.

ryandrake 7y ago
Can you elaborate on the risk you think they are taking? If they lose their job, well, they spend a little quality time with their money then move on to some other multimillion dollar job. They were a senior executive at one company so they can go be a senior exec at any other company. If I get fired, I panic as I blow through my savings and take whatever job I can get. I find that scenario to be a lot more of a risk.
MereInterest 7y ago
> They are taking a big risk personally compared to a typical staff member. Negative effect of a failed CEO: $25M in severance pay [1]. Roughly 10-12 times the lifetime earnings of a college graduate [2]. When the cost of failure is to have enough income to live very comfortable for the rest of their lives, that is not a large cost. Negative effect on employees: needing to find a new job, move to a new location, start a new social life, and that is all assuming that there is the recommended 3-6 month emergency fund. When 40% of US adults would be underwater from an unexpected $400 bill [3], this adds debt and uncertainty to be able to start up again. [1] https://www.beckershospitalreview.com/compensation-issues/healthcare-ceos-see-25m-golden-parachute-on-average-5-things-to-know.html https://www.beckershospitalreview.com/compensation-issues/he... [2] https://www.ssa.gov/policy/docs/research-summaries/education-earnings.html https://www.ssa.gov/policy/docs/research-summaries/education... [3] https://www.fool.com/retirement/2018/05/23/guess-how-many-americans-couldnt-cover-a-400-emerg.aspx https://www.fool.com/retirement/2018/05/23/guess-how-many-am...

analog31 7y ago

They should take as much money as they can grab, just like the rest of us. If inequality is a problem, I think it's better to address it through taxation than through wage fixing.

leetcrew 7y ago
this might be the only realistic way of solving the immediate problem, but I don't find it very satisfying. I don't believe people like mark zuckerberg have actually created billions of dollars of value themselves. it does require hard work, skill, and a bit of luck to get that initial advantage, but then the few people that find themselves in this position are able to ride network effects all the way to the top, basically exploiting a market failure. imo, the ideal society is the opposite of what you said: people who do "useful" stuff should get to keep most of the value they create, and there should be mild restributive programs to ease the burdens of people who can't really contribute. definitely not realistic, but this is the ideal I think we should shoot for. the team of researchers who cure cancer should be worth more than guys like zucc. note: I don't mean to single out zucc; I just think Facebook is a good example of a valuable company that hasn't improved the world.
- anon1m0us 7y ago
  Why should the tax payers subsidize Zuck's income? Imagine facebook has a $100 million profit. If it pays that to Zuck, the company then makes NO profit and pays no tax. Zuck pays income tax on it, but it's not double taxed through the corporation. Thus, the tax payers are subsidizing Zuck's income.
  - leetcrew 7y ago
    I'm suggesting that in a society where only people who do useful things get rich, owners of businesses that have attained most of their value through exploiting network effects will not be extremely wealthy.

iamgopal 7y ago

I have to deal with middle and top tier executives in many sufficient big companies, if not fortune 500, most of them are quite responsible and efficient in the work they do.