5 ms·

Why on earth would the next CEO be incentivized to do anything other than wring all the money out of the company that they can? The punishments for failure are

Why on earth would the next CEO be incentivized to do anything other than wring all the money out of the company that they can? The punishments for failure are insignificant. They get to keep millions and millions of dollars even if they wreck the company.

brink 7y ago
Some people do get a sense of pride and fulfillment out of doing a good job that money can't provide.
- CharlesColeman 7y ago
  > Some people do get a sense of pride and fulfillment out of doing a good job. But a good job for a CEO is building shareholder value, which is now understood as "[wringing] all the money out of the company that they can [for the shareholders]." That's a different job than building an organization that consistently chooses safety over schedule and cost.
  - brink 7y ago
    That's not a sound long-term plan.
    - the_mitsuhiko 7y ago
      It does not seem this sort of general behavior is punished much even in the long term. It's very hard to compete with Boeing so they can do pretty much anything they want if they would want to.
    - deleted 7y ago
      [deleted]
- rectang 7y ago
  We're talking about incentives. Sky-high executive compensation packages don't encourage people to do a better job — they insulate them from failure, thereby disincentivizing them and encouraging them to go down the path of short-termism.
  - shantly 7y ago
    Incentives and punishments only matter for little people. With the rich and powerful, of course they'll do a good job because they simply like doing a good job. ... is apparently the argument. I mean, see also: drug tests for the minimum wage workers, but the CEO? Of course not. Mere employees better not be moonlighting or doing anything else, but the CEO? On two other boards, "advising" a startup on the side, working on another part-time (also as CEO—their "executive assistant" at their 20-person startup actually runs the company)
  - Xixi 7y ago
    Insulating CEOs and executive from failure is a good way to push them to take more risks, if that's what the board/shareholders want. The issue with the 737MAX is that Boeing was too risk-averse: they should have made a brand new plane, but went with what they thought was the low-risk route with the 737 re-engine. The 787 disastrous development ($36B of deferred production costs I think) was certainly a huge cause of this.
    - somurzakov 7y ago
      it is unbelievable that the was MAX considered a low-risk in terms of selling planes, but ended up huge risk in technical perspective. if they just stuck to evaluating technical risk first, and only then the risk of selling the plane - perhaps that route would have led them to developing a new completely plane.
golergka 7y ago
Worked with Microsoft. What stopped Nadella from doing the same as Balmer?
- stoicShell 7y ago
  Microsoft's board sure pulled off a winning strike with Nadella. From "almost IBM-dinosaur" to biggest market cap on Earth pretty much tied with Apple, and massively reversing public image from hated to just about liked by many. Huge win for Nadella. He sure loves what he does, money is besides the point. But then again it's so obvious in his case, I mean I and probably many saw it coming — the man just does not operate at the same level, he's stellar you know, like the Jobs and Musks and Waltons of this world). I have no hope for Boeing to recruit such a great man, I don't think that kind of business actually wants that. Imagine a Dorsey / Musk disruptor, pushing open standards, thinking of direct B2C, whatever... That just wouldn't fly with Boeing's board and mindset (oh pun so very much unintended yet so apt).
beat 7y ago
Why are you assuming that money is their only incentive? It seems to me that if the promise of a golden parachute led to CEOs simply not caring if they do well or not, then there'd be no point in paying them well or trying to hire the best. Heck, there'd be no measure of "best", because all the candidates would just have a string of disasters behind them. There's an S curve to the utility of money. Anyone who works at the kind of level that could become the CEO of a company like Boeing is already quite rich. So money alone isn't the incentive. But thinking of money as sole incentive is kind of characteristic for those of us who actually have to work for a living.
- rectang 7y ago
  > Why are you assuming that money is their only incentive? Why are you assuming that I think money is their only incentive? I was replying to a comment contemplating that "the incentives may be correct now". The amount of money guaranteed to executives chasing short-termism provides a perverse incentive working against any desire to do their job well. There are multiple incentives, but they are not aligned. > There's an S curve to the utility of money. Seems to me that it's more like a bell curve, with the optimal center waaaay to the left of where it is today. Pay too much money and the temptation for CEOs to max out their own gains at the expense of the company's long term health rises.

brink 7y ago

Some people do get a sense of pride and fulfillment out of doing a good job that money can't provide.

CharlesColeman 7y ago
> Some people do get a sense of pride and fulfillment out of doing a good job. But a good job for a CEO is building shareholder value, which is now understood as "[wringing] all the money out of the company that they can [for the shareholders]." That's a different job than building an organization that consistently chooses safety over schedule and cost.
- brink 7y ago
  That's not a sound long-term plan.
  - the_mitsuhiko 7y ago
    It does not seem this sort of general behavior is punished much even in the long term. It's very hard to compete with Boeing so they can do pretty much anything they want if they would want to.
  - deleted 7y ago
    [deleted]
rectang 7y ago
We're talking about incentives. Sky-high executive compensation packages don't encourage people to do a better job — they insulate them from failure, thereby disincentivizing them and encouraging them to go down the path of short-termism.
- shantly 7y ago
  Incentives and punishments only matter for little people. With the rich and powerful, of course they'll do a good job because they simply like doing a good job. ... is apparently the argument. I mean, see also: drug tests for the minimum wage workers, but the CEO? Of course not. Mere employees better not be moonlighting or doing anything else, but the CEO? On two other boards, "advising" a startup on the side, working on another part-time (also as CEO—their "executive assistant" at their 20-person startup actually runs the company)
- Xixi 7y ago
  Insulating CEOs and executive from failure is a good way to push them to take more risks, if that's what the board/shareholders want. The issue with the 737MAX is that Boeing was too risk-averse: they should have made a brand new plane, but went with what they thought was the low-risk route with the 737 re-engine. The 787 disastrous development ($36B of deferred production costs I think) was certainly a huge cause of this.
  - somurzakov 7y ago
    it is unbelievable that the was MAX considered a low-risk in terms of selling planes, but ended up huge risk in technical perspective. if they just stuck to evaluating technical risk first, and only then the risk of selling the plane - perhaps that route would have led them to developing a new completely plane.

golergka 7y ago

Worked with Microsoft. What stopped Nadella from doing the same as Balmer?

stoicShell 7y ago
Microsoft's board sure pulled off a winning strike with Nadella. From "almost IBM-dinosaur" to biggest market cap on Earth pretty much tied with Apple, and massively reversing public image from hated to just about liked by many. Huge win for Nadella. He sure loves what he does, money is besides the point. But then again it's so obvious in his case, I mean I and probably many saw it coming — the man just does not operate at the same level, he's stellar you know, like the Jobs and Musks and Waltons of this world). I have no hope for Boeing to recruit such a great man, I don't think that kind of business actually wants that. Imagine a Dorsey / Musk disruptor, pushing open standards, thinking of direct B2C, whatever... That just wouldn't fly with Boeing's board and mindset (oh pun so very much unintended yet so apt).

beat 7y ago

Why are you assuming that money is their only incentive? It seems to me that if the promise of a golden parachute led to CEOs simply not caring if they do well or not, then there'd be no point in paying them well or trying to hire the best. Heck, there'd be no measure of "best", because all the candidates would just have a string of disasters behind them. There's an S curve to the utility of money. Anyone who works at the kind of level that could become the CEO of a company like Boeing is already quite rich. So money alone isn't the incentive. But thinking of money as sole incentive is kind of characteristic for those of us who actually have to work for a living.

rectang 7y ago
> Why are you assuming that money is their only incentive? Why are you assuming that I think money is their only incentive? I was replying to a comment contemplating that "the incentives may be correct now". The amount of money guaranteed to executives chasing short-termism provides a perverse incentive working against any desire to do their job well. There are multiple incentives, but they are not aligned. > There's an S curve to the utility of money. Seems to me that it's more like a bell curve, with the optimal center waaaay to the left of where it is today. Pay too much money and the temptation for CEOs to max out their own gains at the expense of the company's long term health rises.