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I'd be curious to hear what workers think their CEOs compensation should be. I hear a lot of "a CEO doesn't do 100x the work of their workers." Well, what multi

by daenz 4y ago

I'd be curious to hear what workers think their CEOs compensation should be. I hear a lot of "a CEO doesn't do 100x the work of their workers." Well, what multiple do you think is more appropriate? What is the mechanism for determining that multiple? Direct democratic voting by the employees? Why stop at the CEO? Maybe everybody should vote on everybody else's comp. I'd love to see how that plays out for a company. Anyone know if it has been tried?

cosmotic 4y ago
Just watching undercover boss, the CEOs always do a terrible job at the 'no-to-low-skill work'. I'd guess employees, given a chance to evaluate the CEO using their own job as a metric, would probably chose quite a low figure for the CEO's salary.
vmception 4y ago
Also curious about this Similar to calls for paying “fair share” of taxes
didibus 4y ago
I feel a 1.25x to 3x multiple from the next highest paid employee sounds reasonable to me. I think with CEO I don't understand how the demand and offer works. Wouldn't there be tons of people willing to do the job for way less? So why is it so high? Is it true that there are very few qualified individuals that can do a good job at CEO?
- Gigachad 4y ago
  Programmers are paid so much because their work multiplies out to have huge impacts. CEOs are that on a much larger scale. There are plenty of CEOs who are ok or acceptable, but one that is 1% better means millions or billions extra in profit. Companies with top tier management like Apple have had a non stop run of success for a while now and it’s not just luck. They pay Tim a $99 million package, and he certainly earns the company all that and more back.
  - didibus 4y ago
    That's really not how programmers are paid though. They're paid high salaries only when working at certain companies in some cities or countries, and mostly because it's hard to hire devs. Programmer pay has nothing to do with multiplier, but purely offer and demand in my opinion. That's why I'm not sure why it's any different for CEOs. I've rarely seen a CEO repeat success from one place to another, granted I don't pay that much attention. But I doubt if you moved Tim to Microsoft that suddenly he could revive Windows Phone and overthrow Apples smartphone dominance. I feel the evidence that a CEO has any significant impact on company output seems lacking. Yes they have impact in that they make important decisions, but compared to the decisions being randomly made or made by any other person that could have made them, can you really single out one CEO as being consistently beating others? And can you ignore the executive staff and everyone else as well? How much is it the CEO or the particular set of people in the executive decision making branch, along with all the consulted employees?
tra3 4y ago
That’s a great question because it made me pause and think about what proper ceo compensation could be, rather than just complaining about it. An interesting thought experiment is to see what public servants in position of authority and responsibility get paid. Can’t think of anyone higher than a US president. Turns out that the president gets paid 400k a year. Not a lot relative to what corporate ceos make. https://www.thebalance.com/presidents-salary-4579867 https://www.thebalance.com/presidents-salary-4579867
HomeGear 4y ago
CEOs need to be compensated on business metrics - not all financial. The metrics should account for short- and long-term growth, employee retention, public relations, etc. If you tank the company, you walk away with nothing.
- listenallyall 4y ago
  This is already happening more and more, where an increasing percentage of executive compensation is based on employee satisfaction, diversity measures, community relations, environmental accolades, etc. And guess what? These are all a LOT easier to game than stock prices, profits, market share, and other traditional financial measures. CEOs are loving this change.
joshstrange 4y ago
Personally I like the model where the CEO cannot make more than X times the lowest pay worker or X times the median salary. It's not like they take on any extra risk, in fact, more often than not, they can do terrible things and walk away without suffering any real consequences. We rarely see the people at the top take any responsibility for the actions of the company so what are we paying them for? I refuse to accept they are somehow so much smarter than the people actually do the work. That idea has no basis in reality in my experience. I also am very interested in the co-op model that I've seen a few places (mainly in Europe I think?).
- daenz 4y ago
  >I refuse to accept they are somehow so much smarter than the people actually do the work. Is a sales person who can close a deal on client worth a $10M contract "smarter" than a principal software engineer at the same company? The capacity to bring in revenue isn't necessarily based on the "smarter" metric.
  - joshstrange 4y ago
    And what exactly are they going to sell without the software engineer to build it? I understand the role of sales (even if the vast majority I've had to work with are seedy/liars) and you can flip my statement to say "Well without a sales person it doesn't get sold and the software is effectively useless". I get that, both are needed. That said, the sales position shouldn't bring in multiples of what the engineering position does. I full understand that's not the way things are done today, I also think we do things pretty terribly today. Maybe a better way to phrase it is "I refuse to accept that they (CEO) are somehow worth so much more to the company compared to the people that actually do the work", "Smarter" was a bad word to use originally.
    - jtsiskin 4y ago
      Think of it more as supply/demand and marginal revenue. To simplify - a company should hire more/pay more until the marginal value of that employee < the marginal employee cost. If the 2nd best option for CEO would result in increased revenue by 1%, and the best option by 3%, then it makes sense to pay up to 2% of revenue to get that better CEO. Compare that with the best SWE option (in terms of marginal cost vs marginal gain) vs the 2nd best candidate. Compared to the CEO, the SWE may be far more intelligent, more hardworking, and directly improve the product more. But pay is unfortunately not based on that or any notion of “fairness”
kennend3 4y ago
i think you could do a bit of searching and find your ansewr if you were curious. “It used to be that in the 1950s, 60s, and 70s, CEOs made 3.3 times what a top 0.1% earner made. Now, it’s more than six times,” says Mishel. “CEOs now are making 351 times that of a typical worker, but back in 1978, it was only 31 times. In 1989, it was 61 times.” My background is financial services. So here's a question for you. If the banks are big on outsourcing, and a Canadian bank CEO makes 10+ Million a year while the CEO of the largest banks in the world earns just $185,000 Would it make sense to remove the $10 million dollar CEO and outsource the position? Why does the CEO of a bank which is 10x the size earn less? How many "low level" positions need to be outsourced to equal the CEO's compensation? It isnt up to the employees to determine CEO compensation, it is the board of directors job. The issue is they all sit on one another boards and it is highly nepotistic. Also, once one CEO gets a hike, everyone knows becaues this is public info and they all want matching hikes. Lastly, COVID19 resulted in a lot of companies losing a lot of money, many people losing their jobs, buy why was CEO salary up?
- missedthecue 4y ago
  A CEO's job is to build and maintain relationships with Wall Street, the customers, and the government. Outsourcing makes all of that harder or impossible.
  - kennend3 4y ago
    Explain how they were meeting anyone during the COVID19 lockdowns? Video calls? those can be done offshore... Using your logic, they accomplished nothing during the covid19 lockdowns as hey were unable to meet anyone? it is rare a bank CEO meets anyone, they sit in their podium, out of reach of all but the top most layer of management. This is why they have a CFO, who often does the shareholder meetings, etc.
    - missedthecue 4y ago
      Covid-19 was an exceptionally difficult time. Many weren't able to do these things. This is why most CEOs of fortune 500s are back on the road again.
hospadar 4y ago
> Direct democratic voting by the employees? I would guess but do not know that ESOP corps generally have much lower executive comp for this exact reason? Attempted some limited googling but the (seemingly) best source for this is a lil expensive for me: https://www.nceo.org/data/esop-executive-compensation-survey-report https://www.nceo.org/data/esop-executive-compensation-survey... I would think that employee ownership would generally do a good (or at least better, probably depends on the specific structure?) job of balancing employee comp/executive pay/company success/value ?:shrug:?
gremlinsinc 4y ago
If CEO pay rises 78%, so should worker, CEO pay shouldn't be able to rise without worker pay rising an equal amount, because without employees they wouldn't have a company. Tit for tat.
- Gigachad 4y ago
  Sure, if one company implemented that and the CEO believed they could be earning 78% more but the company can’t afford that given to all employees, the CEO just leave for another company that can pay that amount. The problem is more core, it’s that people are paid their market rate which is largely based on economic impact and ability to be replaced. Which is massively unequal between roles.
kqr 4y ago
Sure. There are democratic organisations where your compensation is determined by a board of your peers, following principles universally agreed upon in the organisation; Morning Star is one of them.
GuB-42 4y ago
> a CEO doesn't do 100x the work of their workers No but the work from a CEO may have way more than 100x the economic impact of the work from a worker. For example, the CEO of a car company may decide whether or not to build a new assembly line, on that decision, the company may lose or earn billions. A single assembly line worker can make the company lose or earn thousands depending on whether he messes things up or is particularly productive. The impact is many orders of magnitude different. As a result, companies will make sure that their CEOs are the best, because what it a few million in pay when a good CEO can make billions. The rest is just supply and demand. Personally I have absolutely no problem with my CEO being paid 100x, 1000x or more than what I make, if it is worth it. I want the company that hires me to succeed, that's how it can afford to pay me. Sure, that a company is successful doesn't mean their employees are treated well, but it is simply impossible for an unsuccessful company to treat their employees well.
- alimov 4y ago
  > For example, the CEO of a car company may decide whether or not to build a new assembly line, on that decision, the company may lose or earn billions. This decision is not made entirely by the CEO, because they aren’t the ones gathering and analyzing the data that would help make an informed decision. And if the CEO was the only person to make that decision then that is only because it is afforded to them by their role, not like a software engineer or sales or w.e are not capable of making a similar decision based on relevant information.. so there is no reason why they should be getting 100x or 1000x what others are making just because they get to sign off on other peoples work.
  - azth 4y ago
    Doesn't the CEO act as the responsible party at the end of the day however? Meaning if his decisions didn't pan out, he's the one who's going to have to answer to them, not others.
    - zihotki 4y ago
      I wonder how he'd answer them. Usually when the things are going in wrong direction, the CEO leaves the company voluntarily or not plus sometimes with a good compensation, and moves to another CEO-like role in another company. No answers/compensations are given to the employees by that CEO.

by daenz 4y ago

cosmotic 4y ago

Just watching undercover boss, the CEOs always do a terrible job at the 'no-to-low-skill work'. I'd guess employees, given a chance to evaluate the CEO using their own job as a metric, would probably chose quite a low figure for the CEO's salary.

vmception 4y ago

Also curious about this Similar to calls for paying “fair share” of taxes

didibus 4y ago

I feel a 1.25x to 3x multiple from the next highest paid employee sounds reasonable to me. I think with CEO I don't understand how the demand and offer works. Wouldn't there be tons of people willing to do the job for way less? So why is it so high? Is it true that there are very few qualified individuals that can do a good job at CEO?

Gigachad 4y ago
Programmers are paid so much because their work multiplies out to have huge impacts. CEOs are that on a much larger scale. There are plenty of CEOs who are ok or acceptable, but one that is 1% better means millions or billions extra in profit. Companies with top tier management like Apple have had a non stop run of success for a while now and it’s not just luck. They pay Tim a $99 million package, and he certainly earns the company all that and more back.
- didibus 4y ago
  That's really not how programmers are paid though. They're paid high salaries only when working at certain companies in some cities or countries, and mostly because it's hard to hire devs. Programmer pay has nothing to do with multiplier, but purely offer and demand in my opinion. That's why I'm not sure why it's any different for CEOs. I've rarely seen a CEO repeat success from one place to another, granted I don't pay that much attention. But I doubt if you moved Tim to Microsoft that suddenly he could revive Windows Phone and overthrow Apples smartphone dominance. I feel the evidence that a CEO has any significant impact on company output seems lacking. Yes they have impact in that they make important decisions, but compared to the decisions being randomly made or made by any other person that could have made them, can you really single out one CEO as being consistently beating others? And can you ignore the executive staff and everyone else as well? How much is it the CEO or the particular set of people in the executive decision making branch, along with all the consulted employees?

tra3 4y ago

That’s a great question because it made me pause and think about what proper ceo compensation could be, rather than just complaining about it. An interesting thought experiment is to see what public servants in position of authority and responsibility get paid. Can’t think of anyone higher than a US president. Turns out that the president gets paid 400k a year. Not a lot relative to what corporate ceos make. https://www.thebalance.com/presidents-salary-4579867 https://www.thebalance.com/presidents-salary-4579867

HomeGear 4y ago

CEOs need to be compensated on business metrics - not all financial. The metrics should account for short- and long-term growth, employee retention, public relations, etc. If you tank the company, you walk away with nothing.

listenallyall 4y ago
This is already happening more and more, where an increasing percentage of executive compensation is based on employee satisfaction, diversity measures, community relations, environmental accolades, etc. And guess what? These are all a LOT easier to game than stock prices, profits, market share, and other traditional financial measures. CEOs are loving this change.

joshstrange 4y ago

Personally I like the model where the CEO cannot make more than X times the lowest pay worker or X times the median salary. It's not like they take on any extra risk, in fact, more often than not, they can do terrible things and walk away without suffering any real consequences. We rarely see the people at the top take any responsibility for the actions of the company so what are we paying them for? I refuse to accept they are somehow so much smarter than the people actually do the work. That idea has no basis in reality in my experience. I also am very interested in the co-op model that I've seen a few places (mainly in Europe I think?).

daenz 4y ago
>I refuse to accept they are somehow so much smarter than the people actually do the work. Is a sales person who can close a deal on client worth a $10M contract "smarter" than a principal software engineer at the same company? The capacity to bring in revenue isn't necessarily based on the "smarter" metric.
- joshstrange 4y ago
  And what exactly are they going to sell without the software engineer to build it? I understand the role of sales (even if the vast majority I've had to work with are seedy/liars) and you can flip my statement to say "Well without a sales person it doesn't get sold and the software is effectively useless". I get that, both are needed. That said, the sales position shouldn't bring in multiples of what the engineering position does. I full understand that's not the way things are done today, I also think we do things pretty terribly today. Maybe a better way to phrase it is "I refuse to accept that they (CEO) are somehow worth so much more to the company compared to the people that actually do the work", "Smarter" was a bad word to use originally.
  - jtsiskin 4y ago
    Think of it more as supply/demand and marginal revenue. To simplify - a company should hire more/pay more until the marginal value of that employee < the marginal employee cost. If the 2nd best option for CEO would result in increased revenue by 1%, and the best option by 3%, then it makes sense to pay up to 2% of revenue to get that better CEO. Compare that with the best SWE option (in terms of marginal cost vs marginal gain) vs the 2nd best candidate. Compared to the CEO, the SWE may be far more intelligent, more hardworking, and directly improve the product more. But pay is unfortunately not based on that or any notion of “fairness”

kennend3 4y ago

i think you could do a bit of searching and find your ansewr if you were curious. “It used to be that in the 1950s, 60s, and 70s, CEOs made 3.3 times what a top 0.1% earner made. Now, it’s more than six times,” says Mishel. “CEOs now are making 351 times that of a typical worker, but back in 1978, it was only 31 times. In 1989, it was 61 times.” My background is financial services. So here's a question for you. If the banks are big on outsourcing, and a Canadian bank CEO makes 10+ Million a year while the CEO of the largest banks in the world earns just $185,000 Would it make sense to remove the $10 million dollar CEO and outsource the position? Why does the CEO of a bank which is 10x the size earn less? How many "low level" positions need to be outsourced to equal the CEO's compensation? It isnt up to the employees to determine CEO compensation, it is the board of directors job. The issue is they all sit on one another boards and it is highly nepotistic. Also, once one CEO gets a hike, everyone knows becaues this is public info and they all want matching hikes. Lastly, COVID19 resulted in a lot of companies losing a lot of money, many people losing their jobs, buy why was CEO salary up?

missedthecue 4y ago
A CEO's job is to build and maintain relationships with Wall Street, the customers, and the government. Outsourcing makes all of that harder or impossible.
- kennend3 4y ago
  Explain how they were meeting anyone during the COVID19 lockdowns? Video calls? those can be done offshore... Using your logic, they accomplished nothing during the covid19 lockdowns as hey were unable to meet anyone? it is rare a bank CEO meets anyone, they sit in their podium, out of reach of all but the top most layer of management. This is why they have a CFO, who often does the shareholder meetings, etc.
  - missedthecue 4y ago
    Covid-19 was an exceptionally difficult time. Many weren't able to do these things. This is why most CEOs of fortune 500s are back on the road again.

hospadar 4y ago

> Direct democratic voting by the employees? I would guess but do not know that ESOP corps generally have much lower executive comp for this exact reason? Attempted some limited googling but the (seemingly) best source for this is a lil expensive for me: https://www.nceo.org/data/esop-executive-compensation-survey-report https://www.nceo.org/data/esop-executive-compensation-survey... I would think that employee ownership would generally do a good (or at least better, probably depends on the specific structure?) job of balancing employee comp/executive pay/company success/value ?:shrug:?

gremlinsinc 4y ago

If CEO pay rises 78%, so should worker, CEO pay shouldn't be able to rise without worker pay rising an equal amount, because without employees they wouldn't have a company. Tit for tat.

Gigachad 4y ago
Sure, if one company implemented that and the CEO believed they could be earning 78% more but the company can’t afford that given to all employees, the CEO just leave for another company that can pay that amount. The problem is more core, it’s that people are paid their market rate which is largely based on economic impact and ability to be replaced. Which is massively unequal between roles.

kqr 4y ago

Sure. There are democratic organisations where your compensation is determined by a board of your peers, following principles universally agreed upon in the organisation; Morning Star is one of them.

GuB-42 4y ago

> a CEO doesn't do 100x the work of their workers No but the work from a CEO may have way more than 100x the economic impact of the work from a worker. For example, the CEO of a car company may decide whether or not to build a new assembly line, on that decision, the company may lose or earn billions. A single assembly line worker can make the company lose or earn thousands depending on whether he messes things up or is particularly productive. The impact is many orders of magnitude different. As a result, companies will make sure that their CEOs are the best, because what it a few million in pay when a good CEO can make billions. The rest is just supply and demand. Personally I have absolutely no problem with my CEO being paid 100x, 1000x or more than what I make, if it is worth it. I want the company that hires me to succeed, that's how it can afford to pay me. Sure, that a company is successful doesn't mean their employees are treated well, but it is simply impossible for an unsuccessful company to treat their employees well.

alimov 4y ago
> For example, the CEO of a car company may decide whether or not to build a new assembly line, on that decision, the company may lose or earn billions. This decision is not made entirely by the CEO, because they aren’t the ones gathering and analyzing the data that would help make an informed decision. And if the CEO was the only person to make that decision then that is only because it is afforded to them by their role, not like a software engineer or sales or w.e are not capable of making a similar decision based on relevant information.. so there is no reason why they should be getting 100x or 1000x what others are making just because they get to sign off on other peoples work.
- azth 4y ago
  Doesn't the CEO act as the responsible party at the end of the day however? Meaning if his decisions didn't pan out, he's the one who's going to have to answer to them, not others.
  - zihotki 4y ago
    I wonder how he'd answer them. Usually when the things are going in wrong direction, the CEO leaves the company voluntarily or not plus sometimes with a good compensation, and moves to another CEO-like role in another company. No answers/compensations are given to the employees by that CEO.