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CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the

CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. So if you think CEO Candidate X will make you a 3x return on your investment, but CEO Candidate Y will make you a 5x return, it's almost certainly worth it to pay him/her the extra $200K to get you there, if that's the market demand. You're paying for experience, contact network, etc. in a job like that much more than you are how many widgets they can produce on an assembly line. So it seems that the idea that a CEO could be automated misses the point of what CEOs do and how they get hired.

mbrodersen 6y ago
Extremely well paid CEO’s fail all the time. There is zero evidence that rewarding CEO’s with absurd amounts of money makes any difference to the long term outcome of the companies they manage. Any idiot can buy back shares to boost share prices and/or cut cost to make the company more valuable short term and fail long term.
harperlee 6y ago
They should then be compensated with a leveraged long-term derivative product that pays based on the stock difference between their company and the industry, 5 to 10 years apart. "You want to be insanely rich? Here's a huge company that's not yours as a resource, now make it so it is the best one in 10 years!"
- andi999 6y ago
  All incentive models for ceos miss the point, that incentives do not work. People will just fulfill the metric, without incentive most people will do what is best for the company.
- Taek 6y ago
  The problem is that the best CEOs might not go for that. There are a lot of long term things that can impact a company for the negative, and you don't want your CEO bailing to a different company the moment that some macro event (semiconductor shortage, new competitor, global pandemic, etc) comes along and alters the long term upside of your company. You want a CEO who is going to stick around and make the best possible decisions to improve the company's trajectory, even if that mostly means keeping the company flat as opposed to faceplanting.
  - whimsicalism 6y ago
    > the best CEOs might not go for that. There are a lot of long term things that can impact a company for the negative You could develop a financial services company selling hedges for that risk to CEOs/executives? > alters the long term upside of your company I don't see how this is worse than short-term stock compensation
    - MattGaiser 6y ago
      > I don't see how this is worse than short-term stock compensation The CEO has an incentive not to destroy the existing value in pursuit of large gains. With compensation based on the industry spread, they may as well risk any existing value as it is worthless to them. Currently: A CEO who does nothing but keep the stock price where it is would get 2 million. If he performs as well as average, he might get 4 million. If he beats the industry, he gets 6 million. With leveraged spread system: A CEO who does nothing but keeps the stock price stable gets 0. A CEO who performs as well as industry gets 0. If he beats industry, he gets 6.
  - SavantIdiot 6y ago
    > The problem is that the best CEOs might not go for that. We created that system, we can change it. CEO entitlement is part of the problem because it has become burned into our culture that they are demigods. They are not.
    - hluska 6y ago
      Ever worked for a company with a truly garbage CEO?? Good heavens, when you’ve got a moron there, you might as well be an air traffic controller at asshole airport.
- cma 6y ago
  Wouldn't it only make sense to gamble away the company in that scenario? Heads you win and the options pays out big, tails bankruptcy, but the option is worth the same as if you just did mediocre (worth nothing).
- hervature 6y ago
  I find it funny that people throw out decades of history. Options contracts, as you propose, introduce the incentive for extreme risk taking because doing "normal boring" things literally doesn't pay. It's one of the main arguments for stock compensation because if the company does poorly, the CEO directly feels it where it hurts (the wallet).
  - sn41 6y ago
    And so they go for stock buyback strategies. Reduce the supply, the stock skyrockets, cash in, leave.
    - MattGaiser 6y ago
      You need profits for stock buybacks. Buybacks are just superior to dividends as a way to return capital.
      - andromeduck 6y ago
        Dividends ought to not be at a tax disadvantage over capital gains for this reason.
        MattGaiser 6y ago
        The problem is also unrealised gains vs realised ones. I don't pay any tax on the stock price increasing. I have to pay tax on dividends. If I don't need the money, I can just let it continue to grow tax free.
        wrigby 6y ago
        Are they not? I thought qualified dividends (that is, dividends on stocks that have been held long enough to qualify for long-term capital gains) are taxed at the long-term capital gains rate.
        freeone3000 6y ago
- mellavora 6y ago
  what makes you think this isn't already the case? CEO comps often include stock options.
  - nathanappere 6y ago
    If you prevent CEOs from selling their stock for the next X years, sure.
    - setr 6y ago
      Isn't that also usually the case? There's generally a vesting period.
- MattGaiser 6y ago
  So what incentive does that CEO have to be cautious with my capital? That just encourages extreme risk.
- lbriner 6y ago
  Isn't part of the problem the overlap between action and effect? I might join a business as CEO and it does really well for 5 years because of the previous CEO, I could claim that it is my leadership and ask for my bonus. On the other hand, maybe I do well but my successor is an idiot and makes the company tank so now I won't get my 10 year bonus because they screwed it all up. Unless your idea only works for CEOs who are prepared to stay for 10 years? That then brings in the complication of when you need them to leave quietly because they are rubbish but you don't want your shareholders to know!
  - aapppwe 6y ago
    this is the problem with any leadership position in general, congress, president.... etc I think the best way to address this is to provide standardize kpi monitoring.
    - mason55 6y ago
      When a measure becomes a target, it ceases to be a good measure Especially for a CEO, who has quite a bit of power to optimize for any measure, it's going to be very hard to craft a measure that gives the results you want and can't be gamed. The most likely outcome is something that's just a worse version of the stock price, because the stock price is just a forward-looking approximation of net income, which is what you'd mostly want to optimize for anyway (ignoring things like B corps).
- DaniloDias 6y ago
  I find this statement strange. Curious if others experience aligns with mine: Being a CEO is all consuming. You don’t want to be a parent and a CEO, cause the company comes first. You don’t want to be married and a CEO, because the company comes first. If you could “automate” this job, the developers behind the scripts become de facto CEO. Their scripts cannot fail. They will have to make the same sacrifices as the meatspace CEO. I dunno if it’s an Icarus thing or what, but the closer I am in interactions with ceos, the more I pity them. Asking these people to trade their lives for the possibility of no payout seems doomed to fail. The only reason people trade their lives for this role is because it is worth the personal damage and risk.
  - munk-a 6y ago
    When I worked in the game industry QA folks were regularly asked to put in twelve to sixteen hours a day - they're sacrificing their health and lives for their jobs but without any promise of payout. Ditto for pretty much anyone else working on the bottom 3/4ths of the economy.
    - DaniloDias 6y ago
      My immediate reaction is the diff between CEO and QA is that QA doesn’t negotiate well. They’re willing to endure bad work for limited pay. You don’t want this type of person leading a company. I’ve also worked (and left) the field of gaming QA. FWIW, I’m not trying to being controversial- this is my sincerely held belief. I think gaming QA is a good foot in the door to a career in tech, but something that should be abandoned as soon as you get a feel for what it takes to work in an agile environment and make your deliverables. The gaming industry seems like the place where you go to kill your health and happiness to me. As long as people keep signing up for the work, conditions will be awful.
      - munk-a 6y ago
        I would suggest a different take-away, it takes power and stability to negotiate power. Basically, you need to have a powerful position to gamble on securing better compensation. If minimum wage were a problem unique to QA[1] then that explanation might ring true but I think the fact that you see the same pattern of exploitation in fast-food and the service sector at large paints a clearer picture that our educational system is just failing to teach people they have personal value. I do agree that the difference between a good CEO and a terrible CEO can be pretty stark - but I also think that the best CEO can't turn around a company rife with nepotism and other organizational diseases - the plebs contribute a lot more to company health than they're given credit for... That's my primary source of disagreement on CEO compensation - everyone else is being undervalued and so the creation of value is being misattributed to a CEO. The CEO should probably be the highest earner at nearly every company - but only rarely should the CEO earn five or six times that of someone in the mail room and we shouldn't see the 200:1 ratios that are relative common today[2]. 1. It does have a unique exacerbating factor, every year a bunch of new grads think "Oh man, video games - I want to work on those" and thus there's a large pool of people willing to be paid peanuts to work in the field. This causes the experienced QA folks to have their labour devalued to compete with the large pool of free labour. I very much agree with your last few sentences - that's what seems to be the take-away for the gaming industry for me as well. 2. A random study - I know the numbers are in this ballpark but I'm not familiar with the specifics https://www.epi.org/publication/ceo-compensation-2018/ https://www.epi.org/publication/ceo-compensation-2018/
- lolthishuman 6y ago
  Then try that and see if it’s better. There shouldn’t be a one way forced option.
- DeonPenny 6y ago
  The issue is what if the CEO refuses. If he's good at his job or the business is in need he could always go to a different company and get paid what he can negotiate for.
- anm89 6y ago
  They should be compensated however their board says they should be compensated. You don't get a say in that. I could say that all German people should wear purple shirts. It doesn't much matter unless I have a proposed method to enforce it.
ForHackernews 6y ago
The problem is there's no way to evaluate if CEO($10M) is actually that much better than CEO($2M). How would you retroactively test the counterfactual of hiring the cheaper candidate? Maybe in the future the stock price of robo-CEO companies can be used as a baseline. If you can't beat the robot index, then you're fired. (Obviously this will never happen because the board members are other CEOs, but you get the idea).
- devoutsalsa 6y ago
  This. A more practical approach would be to embrace the fact that no one really knows what's going to happen & plan accordingly.
- texasbigdata 6y ago
  You're spot on. That's why Harvard Busiess Reviews "best CEO" list is a trailing version of multi-year TSR (total shareholder return) combined with some ESG metrics. It's the best you can currently do.
devilduck 6y ago
Meanwhile even if a CEO completely fails at their job, the amount of compensation they receive for doing a poor job could be better used for something else.
bmmayer1 6y ago
There's another thing that CEOs do which is provide values guidance and inspirational leadership for a company. That's not something a robot can do...yet.
- lbriner 6y ago
  That might be what they are supposed to do but apart from my current company, this has happened in precisely none of my previous employers (about 5 of them). At one company, I didn't even know who the CEO was. We had some company party because we won an award and I had to ask my colleague who the guy was who was speaking. Awkward (but at least I didn't have to ask the CEO who he was).
  - throwawayboise 6y ago
    LOL that happened to me once. I was at some unrelated event and was wearing a company shirt. Someone mentioned to me that her husband worked there. She said his name, and I remarked that I didn't know of him. She sort of stared at me and said with a tone of incredulity, "he's the company vice president!"
temp667 6y ago
And you have only one CEO - so their comp is expensive, but not hugely expensive relative to total org costs. Apple has Tim Cook. In terms of investors evaluation of his ability to generate profits - let's say apple is going to do $400B in sales, and you think Tim's approach over time will yield a 3% improved margin. Is he then worth $12B/year? CEO's have enormous influence on a companies direction. Investors will automate MANY MANY things before they automotive the CEO's job. Let's be a bit serious. What would make Walmart investors more nervous: 1) Being asked to pay all workers $35/hr, or 2) paying the CEO an extra $1M/year? 1.6M employees * 40K+ pay increase = $64 Billion per YEAR. Let's get a grip on what
- throwawayboise 6y ago
  Yes, comparing CEO compensation to what line workers make is a standard play for the outrage promoters, but it really isn't related. When one slice of the pie is already small, making it smaller doesn't make a lot more available for everyone else.
- newobj 6y ago
  Walmart's annual profit is ~$130B so what I'm seeing is that yes in fact it's perfectly feasible for 1.6M Walmart employees to get a $40K/yr raise.
  - temp667 6y ago
    Please don't make up stuff on HN - if you don't have something accurate to share or if it wouldn't support your point please still avoid making things up. Walmart's profit margin is generally 2-3% and is generally $10 - $20B per year. [1] And if Walmart were making $100B, the comp for their CEO be far from a major expense to the corp. [1] - https://finance.yahoo.com/quote/WMT/financials/ https://finance.yahoo.com/quote/WMT/financials/
    - shuntress 6y ago
      I think you might be missing the part that says "All numbers in thousands" on that table you've linked.
z3t4 6y ago
One person cannot by her/him self return 3x or 5x profit. Its always about the team. And good team leaders are very hard to get by.
- crazygringo 6y ago
  That doesn't matter, because it's generally the CEO who puts together the team, motivates it, keeps it accountable, etc. Obviously the board has input on the rest of the C-suite, but it's still most fundamentally the CEO who is responsible for the team.
- edanm 6y ago
  That's probably not true, at least in the sense that op intended. It's almost certain that Steve jobs or Elon musk were much more than 3-5x more productive than the next best options facing their companies, for example.
deleted 6y ago
[deleted]
egh 6y ago
Nice. We finally found the guy who believes this fairy tale!
- robertlagrant 6y ago
  Anyone who pays a CEO well believes this. Can you find a large company that doesn't believe it?
ab111111111 6y ago
Sure. Quite. But why not try developing an AI to replace them that can make you a >5x return?
- runeks 6y ago
  Because they may be so expensive precisely because it’s difficult to automate them.
- mytailorisrich 6y ago
  Careful what you wish for here. I suspect that if an AI can replace the job of a CEO then all other jobs will be gone as well.
  - warent 6y ago
    The fact that the western society finds job automation to be a danger (or dystopian) is an indicator that something is severely dated at best--or dangerously corrupt at worst--with our economic system. Such a thing would be a utopian outcome. If this kind work can be automated in a humane way, then the vast majority of work can be automated. That means people can be freed to spend every waking moment on art and play.
    - quickthrowman 6y ago
      How are resources allocated in this utopia?
      - fighterpilot 6y ago
        My personal guess is - assuming that democracy is in tact, redistribution will be voted in with landslide support. In a hypothetical future where almost nobody can compete with an AGI and 90% of voters find themselves completely useless in the economy, the proportion of voters who are against redistribution will drop precipitously.
        6y ago
mellosouls 6y ago
This seems to miss one of the main points of the article that they are happy to dish out automation to other roles but can't quite bring it to bear on themselves...
zelon88 6y ago
The performance of a business can be measured by a machine in finite metrics. Things like opportunity cost are a reliable way for machines to make this determination. You give it your business metrics and tell it which ones are variable. Then run the simulation over and over with different levels of risk tolerance, risk appetite, political factors ect and see which ones result in the highest opportunity cost. Then you run the next simulation assuming the previous one is reality and keep extrapolating a beneficial future for the company. 24/7/365. It is naive to think that every other position within a company could be eliminated except the CEO. Of course it could be, and eventually you can expect that it will be. It's when humans are no longer the shareholders that we all need to be concerned. If we're still alive.
anigbrowl 6y ago
Lots of people said the same thing about market traders and yet a great deal of their activity has been successfully automated.
effingwewt 6y ago
Hahaha found the CEO? 'Jesus Christ himself isnt worth 500x the worker's wages' CEOs provide no real value, period. They also get golden parachutes even if they sink the ship. It's inexcusable and I'll bet dollars to donuts 99% of companies don't even need one.
hintymad 6y ago
A CEO also gets high pay because of their performance can be measured. Stock price, how soon a crisis is handled, employee attrition, and etc. I forgot who discussed it in depth, maybe Paul Graham, and the conclusion was that engineers should learn from the lesson, and figure out a way to show measurable impact, the true visibility, of their work.
tonyedgecombe 6y ago
They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. Mostly I think they are paid according to a compensation committee made up of board members and other executives. It's not a surprise that these people have voted for huge wage rises for each other.
thorwasdfasdf 6y ago
That assumes you can predict which CEO will do better, not at all a certain thing.
hedora 6y ago
After dealing personally with a few CEOs (good and bad), I’ve come to the conclusion they’re paid proportionally to the amount of damage they can cause. This probably applies to many other professions. Doctors come to mind. Teachers and police don’t, though.

mbrodersen 6y ago

Extremely well paid CEO’s fail all the time. There is zero evidence that rewarding CEO’s with absurd amounts of money makes any difference to the long term outcome of the companies they manage. Any idiot can buy back shares to boost share prices and/or cut cost to make the company more valuable short term and fail long term.

harperlee 6y ago

They should then be compensated with a leveraged long-term derivative product that pays based on the stock difference between their company and the industry, 5 to 10 years apart. "You want to be insanely rich? Here's a huge company that's not yours as a resource, now make it so it is the best one in 10 years!"

andi999 6y ago
All incentive models for ceos miss the point, that incentives do not work. People will just fulfill the metric, without incentive most people will do what is best for the company.
Taek 6y ago
The problem is that the best CEOs might not go for that. There are a lot of long term things that can impact a company for the negative, and you don't want your CEO bailing to a different company the moment that some macro event (semiconductor shortage, new competitor, global pandemic, etc) comes along and alters the long term upside of your company. You want a CEO who is going to stick around and make the best possible decisions to improve the company's trajectory, even if that mostly means keeping the company flat as opposed to faceplanting.
- whimsicalism 6y ago
  > the best CEOs might not go for that. There are a lot of long term things that can impact a company for the negative You could develop a financial services company selling hedges for that risk to CEOs/executives? > alters the long term upside of your company I don't see how this is worse than short-term stock compensation
  - MattGaiser 6y ago
    > I don't see how this is worse than short-term stock compensation The CEO has an incentive not to destroy the existing value in pursuit of large gains. With compensation based on the industry spread, they may as well risk any existing value as it is worthless to them. Currently: A CEO who does nothing but keep the stock price where it is would get 2 million. If he performs as well as average, he might get 4 million. If he beats the industry, he gets 6 million. With leveraged spread system: A CEO who does nothing but keeps the stock price stable gets 0. A CEO who performs as well as industry gets 0. If he beats industry, he gets 6.
- SavantIdiot 6y ago
  > The problem is that the best CEOs might not go for that. We created that system, we can change it. CEO entitlement is part of the problem because it has become burned into our culture that they are demigods. They are not.
  - hluska 6y ago
    Ever worked for a company with a truly garbage CEO?? Good heavens, when you’ve got a moron there, you might as well be an air traffic controller at asshole airport.
cma 6y ago
Wouldn't it only make sense to gamble away the company in that scenario? Heads you win and the options pays out big, tails bankruptcy, but the option is worth the same as if you just did mediocre (worth nothing).
hervature 6y ago
I find it funny that people throw out decades of history. Options contracts, as you propose, introduce the incentive for extreme risk taking because doing "normal boring" things literally doesn't pay. It's one of the main arguments for stock compensation because if the company does poorly, the CEO directly feels it where it hurts (the wallet).
- sn41 6y ago
  And so they go for stock buyback strategies. Reduce the supply, the stock skyrockets, cash in, leave.
  - MattGaiser 6y ago
    You need profits for stock buybacks. Buybacks are just superior to dividends as a way to return capital.
    - andromeduck 6y ago
      Dividends ought to not be at a tax disadvantage over capital gains for this reason.
      - MattGaiser 6y ago
        The problem is also unrealised gains vs realised ones. I don't pay any tax on the stock price increasing. I have to pay tax on dividends. If I don't need the money, I can just let it continue to grow tax free.
      - wrigby 6y ago
        Are they not? I thought qualified dividends (that is, dividends on stocks that have been held long enough to qualify for long-term capital gains) are taxed at the long-term capital gains rate.
        freeone3000 6y ago
mellavora 6y ago
what makes you think this isn't already the case? CEO comps often include stock options.
- nathanappere 6y ago
  If you prevent CEOs from selling their stock for the next X years, sure.
  - setr 6y ago
    Isn't that also usually the case? There's generally a vesting period.
MattGaiser 6y ago
So what incentive does that CEO have to be cautious with my capital? That just encourages extreme risk.
lbriner 6y ago
Isn't part of the problem the overlap between action and effect? I might join a business as CEO and it does really well for 5 years because of the previous CEO, I could claim that it is my leadership and ask for my bonus. On the other hand, maybe I do well but my successor is an idiot and makes the company tank so now I won't get my 10 year bonus because they screwed it all up. Unless your idea only works for CEOs who are prepared to stay for 10 years? That then brings in the complication of when you need them to leave quietly because they are rubbish but you don't want your shareholders to know!
- aapppwe 6y ago
  this is the problem with any leadership position in general, congress, president.... etc I think the best way to address this is to provide standardize kpi monitoring.
  - mason55 6y ago
    When a measure becomes a target, it ceases to be a good measure Especially for a CEO, who has quite a bit of power to optimize for any measure, it's going to be very hard to craft a measure that gives the results you want and can't be gamed. The most likely outcome is something that's just a worse version of the stock price, because the stock price is just a forward-looking approximation of net income, which is what you'd mostly want to optimize for anyway (ignoring things like B corps).
DaniloDias 6y ago
I find this statement strange. Curious if others experience aligns with mine: Being a CEO is all consuming. You don’t want to be a parent and a CEO, cause the company comes first. You don’t want to be married and a CEO, because the company comes first. If you could “automate” this job, the developers behind the scripts become de facto CEO. Their scripts cannot fail. They will have to make the same sacrifices as the meatspace CEO. I dunno if it’s an Icarus thing or what, but the closer I am in interactions with ceos, the more I pity them. Asking these people to trade their lives for the possibility of no payout seems doomed to fail. The only reason people trade their lives for this role is because it is worth the personal damage and risk.
- munk-a 6y ago
  When I worked in the game industry QA folks were regularly asked to put in twelve to sixteen hours a day - they're sacrificing their health and lives for their jobs but without any promise of payout. Ditto for pretty much anyone else working on the bottom 3/4ths of the economy.
  - DaniloDias 6y ago
    My immediate reaction is the diff between CEO and QA is that QA doesn’t negotiate well. They’re willing to endure bad work for limited pay. You don’t want this type of person leading a company. I’ve also worked (and left) the field of gaming QA. FWIW, I’m not trying to being controversial- this is my sincerely held belief. I think gaming QA is a good foot in the door to a career in tech, but something that should be abandoned as soon as you get a feel for what it takes to work in an agile environment and make your deliverables. The gaming industry seems like the place where you go to kill your health and happiness to me. As long as people keep signing up for the work, conditions will be awful.
    - munk-a 6y ago
      I would suggest a different take-away, it takes power and stability to negotiate power. Basically, you need to have a powerful position to gamble on securing better compensation. If minimum wage were a problem unique to QA[1] then that explanation might ring true but I think the fact that you see the same pattern of exploitation in fast-food and the service sector at large paints a clearer picture that our educational system is just failing to teach people they have personal value. I do agree that the difference between a good CEO and a terrible CEO can be pretty stark - but I also think that the best CEO can't turn around a company rife with nepotism and other organizational diseases - the plebs contribute a lot more to company health than they're given credit for... That's my primary source of disagreement on CEO compensation - everyone else is being undervalued and so the creation of value is being misattributed to a CEO. The CEO should probably be the highest earner at nearly every company - but only rarely should the CEO earn five or six times that of someone in the mail room and we shouldn't see the 200:1 ratios that are relative common today[2]. 1. It does have a unique exacerbating factor, every year a bunch of new grads think "Oh man, video games - I want to work on those" and thus there's a large pool of people willing to be paid peanuts to work in the field. This causes the experienced QA folks to have their labour devalued to compete with the large pool of free labour. I very much agree with your last few sentences - that's what seems to be the take-away for the gaming industry for me as well. 2. A random study - I know the numbers are in this ballpark but I'm not familiar with the specifics https://www.epi.org/publication/ceo-compensation-2018/ https://www.epi.org/publication/ceo-compensation-2018/
lolthishuman 6y ago
Then try that and see if it’s better. There shouldn’t be a one way forced option.
DeonPenny 6y ago
The issue is what if the CEO refuses. If he's good at his job or the business is in need he could always go to a different company and get paid what he can negotiate for.
anm89 6y ago
They should be compensated however their board says they should be compensated. You don't get a say in that. I could say that all German people should wear purple shirts. It doesn't much matter unless I have a proposed method to enforce it.

ForHackernews 6y ago

The problem is there's no way to evaluate if CEO($10M) is actually that much better than CEO($2M). How would you retroactively test the counterfactual of hiring the cheaper candidate? Maybe in the future the stock price of robo-CEO companies can be used as a baseline. If you can't beat the robot index, then you're fired. (Obviously this will never happen because the board members are other CEOs, but you get the idea).

devoutsalsa 6y ago
This. A more practical approach would be to embrace the fact that no one really knows what's going to happen & plan accordingly.
texasbigdata 6y ago
You're spot on. That's why Harvard Busiess Reviews "best CEO" list is a trailing version of multi-year TSR (total shareholder return) combined with some ESG metrics. It's the best you can currently do.

devilduck 6y ago

Meanwhile even if a CEO completely fails at their job, the amount of compensation they receive for doing a poor job could be better used for something else.

bmmayer1 6y ago

There's another thing that CEOs do which is provide values guidance and inspirational leadership for a company. That's not something a robot can do...yet.

lbriner 6y ago
That might be what they are supposed to do but apart from my current company, this has happened in precisely none of my previous employers (about 5 of them). At one company, I didn't even know who the CEO was. We had some company party because we won an award and I had to ask my colleague who the guy was who was speaking. Awkward (but at least I didn't have to ask the CEO who he was).
- throwawayboise 6y ago
  LOL that happened to me once. I was at some unrelated event and was wearing a company shirt. Someone mentioned to me that her husband worked there. She said his name, and I remarked that I didn't know of him. She sort of stared at me and said with a tone of incredulity, "he's the company vice president!"

temp667 6y ago

And you have only one CEO - so their comp is expensive, but not hugely expensive relative to total org costs. Apple has Tim Cook. In terms of investors evaluation of his ability to generate profits - let's say apple is going to do $400B in sales, and you think Tim's approach over time will yield a 3% improved margin. Is he then worth $12B/year? CEO's have enormous influence on a companies direction. Investors will automate MANY MANY things before they automotive the CEO's job. Let's be a bit serious. What would make Walmart investors more nervous: 1) Being asked to pay all workers $35/hr, or 2) paying the CEO an extra $1M/year? 1.6M employees * 40K+ pay increase = $64 Billion per YEAR. Let's get a grip on what

throwawayboise 6y ago
Yes, comparing CEO compensation to what line workers make is a standard play for the outrage promoters, but it really isn't related. When one slice of the pie is already small, making it smaller doesn't make a lot more available for everyone else.
newobj 6y ago
Walmart's annual profit is ~$130B so what I'm seeing is that yes in fact it's perfectly feasible for 1.6M Walmart employees to get a $40K/yr raise.
- temp667 6y ago
  Please don't make up stuff on HN - if you don't have something accurate to share or if it wouldn't support your point please still avoid making things up. Walmart's profit margin is generally 2-3% and is generally $10 - $20B per year. [1] And if Walmart were making $100B, the comp for their CEO be far from a major expense to the corp. [1] - https://finance.yahoo.com/quote/WMT/financials/ https://finance.yahoo.com/quote/WMT/financials/
  - shuntress 6y ago
    I think you might be missing the part that says "All numbers in thousands" on that table you've linked.

z3t4 6y ago

One person cannot by her/him self return 3x or 5x profit. Its always about the team. And good team leaders are very hard to get by.

crazygringo 6y ago
That doesn't matter, because it's generally the CEO who puts together the team, motivates it, keeps it accountable, etc. Obviously the board has input on the rest of the C-suite, but it's still most fundamentally the CEO who is responsible for the team.
edanm 6y ago
That's probably not true, at least in the sense that op intended. It's almost certain that Steve jobs or Elon musk were much more than 3-5x more productive than the next best options facing their companies, for example.

deleted 6y ago

[deleted]

egh 6y ago

Nice. We finally found the guy who believes this fairy tale!

robertlagrant 6y ago
Anyone who pays a CEO well believes this. Can you find a large company that doesn't believe it?

ab111111111 6y ago

Sure. Quite. But why not try developing an AI to replace them that can make you a >5x return?

runeks 6y ago
Because they may be so expensive precisely because it’s difficult to automate them.
mytailorisrich 6y ago
Careful what you wish for here. I suspect that if an AI can replace the job of a CEO then all other jobs will be gone as well.
- warent 6y ago
  The fact that the western society finds job automation to be a danger (or dystopian) is an indicator that something is severely dated at best--or dangerously corrupt at worst--with our economic system. Such a thing would be a utopian outcome. If this kind work can be automated in a humane way, then the vast majority of work can be automated. That means people can be freed to spend every waking moment on art and play.
  - quickthrowman 6y ago
    How are resources allocated in this utopia?
    - fighterpilot 6y ago
      My personal guess is - assuming that democracy is in tact, redistribution will be voted in with landslide support. In a hypothetical future where almost nobody can compete with an AGI and 90% of voters find themselves completely useless in the economy, the proportion of voters who are against redistribution will drop precipitously.
      - 6y ago

mellosouls 6y ago

This seems to miss one of the main points of the article that they are happy to dish out automation to other roles but can't quite bring it to bear on themselves...

zelon88 6y ago

The performance of a business can be measured by a machine in finite metrics. Things like opportunity cost are a reliable way for machines to make this determination. You give it your business metrics and tell it which ones are variable. Then run the simulation over and over with different levels of risk tolerance, risk appetite, political factors ect and see which ones result in the highest opportunity cost. Then you run the next simulation assuming the previous one is reality and keep extrapolating a beneficial future for the company. 24/7/365. It is naive to think that every other position within a company could be eliminated except the CEO. Of course it could be, and eventually you can expect that it will be. It's when humans are no longer the shareholders that we all need to be concerned. If we're still alive.

anigbrowl 6y ago

Lots of people said the same thing about market traders and yet a great deal of their activity has been successfully automated.

effingwewt 6y ago

Hahaha found the CEO? 'Jesus Christ himself isnt worth 500x the worker's wages' CEOs provide no real value, period. They also get golden parachutes even if they sink the ship. It's inexcusable and I'll bet dollars to donuts 99% of companies don't even need one.

hintymad 6y ago

A CEO also gets high pay because of their performance can be measured. Stock price, how soon a crisis is handled, employee attrition, and etc. I forgot who discussed it in depth, maybe Paul Graham, and the conclusion was that engineers should learn from the lesson, and figure out a way to show measurable impact, the true visibility, of their work.

tonyedgecombe 6y ago

They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. Mostly I think they are paid according to a compensation committee made up of board members and other executives. It's not a surprise that these people have voted for huge wage rises for each other.

thorwasdfasdf 6y ago

That assumes you can predict which CEO will do better, not at all a certain thing.

hedora 6y ago

After dealing personally with a few CEOs (good and bad), I’ve come to the conclusion they’re paid proportionally to the amount of damage they can cause. This probably applies to many other professions. Doctors come to mind. Teachers and police don’t, though.