5 ms·

> CEOs are getting ever-higher pay over time because of their power to set pay and because so much of their pay (more than 80%) is stock-relate This is the key

> CEOs are getting ever-higher pay over time because of their power to set pay and because so much of their pay (more than 80%) is stock-relate This is the key to their high compensations, and in some ways it has to be like that because how else are you going to incentivize a CEO to raise the value of the company? Say a CEO was paid exactly what the engineers at a company were paid, it doesn't matter to him if the stock goes up or down because his pay stays the same. By tying the CEO's salary to the stock price, you're telling them that they can make a killing if the company makes a killing. It's unfair but it's necessary.

derac 4y ago
How about you fire them if they don't perform and only hire people who perform well. Even with this incentive most CEOs don't perform well and many gut their companies to raise the stock price and leave.
- uoaei 4y ago
  This is a really important point. Seems like the people who are justifying pay imbalances are doing so on the basis of conflating a company's value with its stock price. Ultimately the question comes down to your ethics around money, but it is interesting to get a peek behind the psychological veil. People who worship CEOs for being able to pull big buxxx do so because they assume that more money in existence is better, period, without thinking about where that money goes and what it funds.
jakupovic 4y ago
Wow, really? The CEO needs to be incentivized 399 times? Pretty sure anything more than 0 would work. Wow, just wow that someone can actually think and better yet write it out. Nobody needs a 399X incentive. That is just stupid.
- jokethrowaway 4y ago
  You're not competing with normal employees but with other CEOs and with other companies.
SirSourdough 4y ago
I don’t think there’s all that much concern about incentive packages tied to performance. The question in my mind is: how much compensation is required to provide that incentive? And is it reasonable for that to result in a small portion of people making not just more than the typical person, but astronomically more to the point where the typical person is left very nearly broke and powerless?
- jokethrowaway 4y ago
  The real question is: How much money are the shareholders happy to pay for a CEO to accomodate their level of risk and their level of confidence in the returns? If they could pay less, they would.
  - uoaei 4y ago
    Name one company where shareholders get to vote on CEO pay.
    - ectopod 4y ago
      Its not uncommon in the UK but the big investors tend to be funds and their managers are part of the same class that benefits from ever increasing executive compensation. So they rarely vote against.
lm28469 4y ago
Damn, why did people create companies for the past 300 years ? Why did people become entrepreneur ? They didn't have anywhere close to 400 times their workers salary, must have been a miserable life What's the point of it all when you have enough money to sustain your entire genealogy tree from the birth of earth to the heat death of the universe ? These people are clinically ill
- ajsnigrutin 4y ago
  How many companies in the last 300 years were as large as amazon or walmart? A local hairdressing salon owner/director doesn't earn a lot more than the employees there. Maybe it's time to disincentivize huge companies in favour of many smaller ones.
  - jandrese 4y ago
    > Maybe it's time to disincentivize huge companies in favour of many smaller ones. That's a fight directly against market forces. It's exceptionally difficult to fight the market and usually quite unpopular.
  - robocat 4y ago
    > A local hairdressing salon owner/director doesn't earn a lot more That is linear thinking, however income is very non-linear. In New Zealand minimum wage is ~$800 for 40 hours and you might have $100 disposable income after living expenses. Let’s say the owner gets $1200 at the end of the week. Their disposable income has increased by wayyy more than a 1:1 ratio. That is why you really care about a $0.50 pay rise if you are working near minimum wage, because it makes a huge difference to your marginal disposable income. If you are “normal” minimum-wage then you compete for rental properties against all other normal people, so costs rise to soak up disposable income. A similar dynamic occurs for most people in middle/professional income levels - people compete against each other to pay as much as possible of their income on their mortgage and so they also don’t end up with as much disposable income as you might think. You probably know people in the 1% income bracket that are struggling to make ends meet due to that reason (they are way better off, and have far more disposable income and savings, but not as much as one might naively assume).
iforgotpassword 4y ago
No, it's not necessary. It's exactly why things like Intel's current situation happen. You get some douche with an economics background in charge that spends a decade optimizing for profit, and when you realize the company is fucked because everybody else is suddenly ahead of you, you just move on an sell your time there as a success, while the next guy tries to fix it. Which obviously means it will get pretty bad for a while, but that's ok, because when shareholders are fed up with it after a few years, you put one of those douches in charge again that can take credit for the eventual success of the previous guy's work.
deleted 4y ago
[deleted]
JustSomeNobody 4y ago
>>> incentivize a CEO to raise the value of the company They don't. The workers do.

derac 4y ago

How about you fire them if they don't perform and only hire people who perform well. Even with this incentive most CEOs don't perform well and many gut their companies to raise the stock price and leave.

uoaei 4y ago
This is a really important point. Seems like the people who are justifying pay imbalances are doing so on the basis of conflating a company's value with its stock price. Ultimately the question comes down to your ethics around money, but it is interesting to get a peek behind the psychological veil. People who worship CEOs for being able to pull big buxxx do so because they assume that more money in existence is better, period, without thinking about where that money goes and what it funds.

jakupovic 4y ago

Wow, really? The CEO needs to be incentivized 399 times? Pretty sure anything more than 0 would work. Wow, just wow that someone can actually think and better yet write it out. Nobody needs a 399X incentive. That is just stupid.

jokethrowaway 4y ago
You're not competing with normal employees but with other CEOs and with other companies.

SirSourdough 4y ago

I don’t think there’s all that much concern about incentive packages tied to performance. The question in my mind is: how much compensation is required to provide that incentive? And is it reasonable for that to result in a small portion of people making not just more than the typical person, but astronomically more to the point where the typical person is left very nearly broke and powerless?

jokethrowaway 4y ago
The real question is: How much money are the shareholders happy to pay for a CEO to accomodate their level of risk and their level of confidence in the returns? If they could pay less, they would.
- uoaei 4y ago
  Name one company where shareholders get to vote on CEO pay.
  - ectopod 4y ago
    Its not uncommon in the UK but the big investors tend to be funds and their managers are part of the same class that benefits from ever increasing executive compensation. So they rarely vote against.

lm28469 4y ago

Damn, why did people create companies for the past 300 years ? Why did people become entrepreneur ? They didn't have anywhere close to 400 times their workers salary, must have been a miserable life What's the point of it all when you have enough money to sustain your entire genealogy tree from the birth of earth to the heat death of the universe ? These people are clinically ill

ajsnigrutin 4y ago
How many companies in the last 300 years were as large as amazon or walmart? A local hairdressing salon owner/director doesn't earn a lot more than the employees there. Maybe it's time to disincentivize huge companies in favour of many smaller ones.
- jandrese 4y ago
  > Maybe it's time to disincentivize huge companies in favour of many smaller ones. That's a fight directly against market forces. It's exceptionally difficult to fight the market and usually quite unpopular.
- robocat 4y ago
  > A local hairdressing salon owner/director doesn't earn a lot more That is linear thinking, however income is very non-linear. In New Zealand minimum wage is ~$800 for 40 hours and you might have $100 disposable income after living expenses. Let’s say the owner gets $1200 at the end of the week. Their disposable income has increased by wayyy more than a 1:1 ratio. That is why you really care about a $0.50 pay rise if you are working near minimum wage, because it makes a huge difference to your marginal disposable income. If you are “normal” minimum-wage then you compete for rental properties against all other normal people, so costs rise to soak up disposable income. A similar dynamic occurs for most people in middle/professional income levels - people compete against each other to pay as much as possible of their income on their mortgage and so they also don’t end up with as much disposable income as you might think. You probably know people in the 1% income bracket that are struggling to make ends meet due to that reason (they are way better off, and have far more disposable income and savings, but not as much as one might naively assume).

iforgotpassword 4y ago

No, it's not necessary. It's exactly why things like Intel's current situation happen. You get some douche with an economics background in charge that spends a decade optimizing for profit, and when you realize the company is fucked because everybody else is suddenly ahead of you, you just move on an sell your time there as a success, while the next guy tries to fix it. Which obviously means it will get pretty bad for a while, but that's ok, because when shareholders are fed up with it after a few years, you put one of those douches in charge again that can take credit for the eventual success of the previous guy's work.

deleted 4y ago

[deleted]

JustSomeNobody 4y ago

>>> incentivize a CEO to raise the value of the company They don't. The workers do.