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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

by 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.

by Taek 6y ago

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.