15 ms·
CEOs’ pay climbed before layoffs at tech giants like Alphabet and Microsoft
- silverkiwi 3y agoDeciding to layoff or not is a complex decision. Here the article only looks at Companies that did layoff. Although more difficult, would be interesting to also look at companies that also made this decision and decided not to layoff. Essentially widening the group of Companies evaluated to one step before the layoffs/no layoffs decision is made.
- lock-the-spock 3y agoIs there really such a thing as to non-decide? This seems to me a pretty impossible study to do.
- tyingq 3y agoOr to look at companies that were more conversative about ramping up, used natural attrition more effectively to avoid the need for layoffs, used early retirement or separation incentives before layoffs, etc. Of course, that's difficult to research since it's not as newsworthy to do the right thing :)
- nine_zeros 3y agoCEOs pay is tied to the stock price. They will do whatever it takes to boost the stock price, until they are out with a golden parachute. From their perspective, the business is all about boosting the stock price. It doesn't matter if the boost comes from innovation, or from polluting the planet, or from unscrupulous addictive practices, or from culling the employees. Employees are merely, an often undesired, side-effect in the business of boosting stock prices.
- mjevans 3y agoExecutive stock prices should vest at the first of 25 years from the date earned or 10 years after they've left the company. That would encourage long term strategies rather than pump and dump.
- nine_zeros 3y agoThat would certainly be one way of attaining long term vision. But who will enforce this requirement? Only pension funds and other large shareholders have any (and often impractical) leverage over the board C-suite. Wall-street shareholders demand faster growth until they themselves can exit out. They don't care about the business or the services or the employees. They want a high growth return, year-over-year until their own investment carry continues to exist.
- toomuchtodo 3y agoStock buybacks used to be illegal. Lots of ways to use policy to encourage long-term shareholder value if boards and corporate bylaws won’t.
- nine_zeros 3y agoStock buyback is equivalent to paying a dividend. If stock buybacks are prevented, companies will continue to layoff and pay out dividends. It doesn't solve the root cause that employees don't have a seat at the decision-making table. At a minimum, if corporation laws were modified such that every laid off employee must be issued 1 year worth of shares as a golden parachute, the incentives will all get aligned very quickly and employees will not be abruptly thrown away.
- mrcode007 3y agoIt is not the same as a dividend. Not even close. By definition, one returns cash, the other doesn’t. The stock buyback also prevents market price discovery because of an artificial price floor. The buyback is also a subject to buyback tax, transaction fee at the broker, and the benefits of the buyback are not captured by the long term holders, only by short term holders, e.g. insiders, who often sell into the buyback guaranteeing a price floor and effectively an execution price.
- s1artibartfast 3y agoStock BuyBacks have nothing to do with long or short-term vision.
- kccqzy 3y agoAnd frankly layoffs had almost no effect on their stock prices. Announcing new products, even if quite half-baked AI efforts, had much bigger impact on stock prices than layoffs.
- henry2023 3y agoAsk facebook
- nine_zeros 3y ago> And frankly layoffs had almost no effect on their stock prices. Announcing new products, even if quite half-baked AI efforts, had much bigger impact on stock prices than layoffs. This is true but you know what? Every action of the CEO is meant for the investors and large shareholders. The layoff is merely a signal that says "I am willing to do what it takes to give you your return. Buy more shares"
- madballster 3y agoThat is a very narrow and frankly sweepingly incorrect description of "CEOs" or "companies". They're not all the same. I for one (alongside many other investors) carefully study incentive programs and compensation oversight executed by the board of directors. There are many thoughtful companies (and CEOs) who e.g. align over very long-term targets, such as '5 year return on capital". Investors have found out a long time ago that incentivizing by short-term measures such as share price (or revenues, or EPS) can bring about very adverse long-term investing outcomes.
- nine_zeros 3y agoConcurred but... Let's imagine that shareholders agree on a 5 year return on capital plan. Now let's say some missteps/economic circumstances make revenue go down in the 4th year. The CEO will get heat from the investors. This is especially true if the board contains an investor representative who can vote the CEO out. What choice does the CEO have at that time but to boost short term? Look at the same story from an employee perspective. Imagine that employee worked for 4 years and the downturn arrives. They invested a lot of time of their precious life, much like the shareholders invested their precious money. In the downturn, the CEO gets to make a choice and the choice ALWAYS is to boost the stock price for shareholders (and for themselves). Often, at the expense of employees.
- Salgat 3y agoExactly. It's more accurate to say "we look at long term as long as the short term stock price also looks good".
- whimsicalism 3y agoDo you all not understand that the stock price reflects the long term prospects of the company? It’s literally priced in
- somsak2 3y agoIt's really crazy how just a few months ago Facebook's long-term prospects were worth just 1/3 of what they are now! What do you think changed so much during that time to warrant the 3x increase?
- ChuckMcM 3y agoAnd if you make them subject to "alternative minimum tax" where their stock based compensation is considered regular income for the year it is awarded based on the difference between the strike price and the market price, you "moderate" that process somewhat. But if you're a politician and your donors are all rich elites who really hated that aspect of AMT you get repeal it for them: https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-changes-Alternative-Minimum.html https://www.bowlesrice.com/tax-cuts-and-jobs-act-2018-change...
- sjs7007 3y ago> compensation is considered regular income for the year it is awarded based on the difference between the strike price and the market price Isn't that exactly how it works? Your grant price just determines your number of your shares. When your shares vest they get taxed as regular income for the entirety of the vest amount.
- dmoy 3y ago> When your shares vest they get taxed as regular income for the entirety of the vest amount. This describes restricted stock units. Stock options are taxed differently.
- s1artibartfast 3y agoI disagree with pretty much everything you say except this. >Employees are merely, an often undesired, side-effect in the business of boosting stock prices. Employees are worse than a side effect, they're a cost center to be avoided if possible. You want to achieve your goals with as few employees as possible.
- mistrial9 3y agoit is truly a product of the computer age, to come up with self-centered ego BS like this. You do not acknowledge different industries or business models, distribution of physical goods or market brand activity, let along "things that take more that one person to do" .. This is a rote recital of an inner dialog of an ill "investor" CEO who might as soon throw his secretary off of a bridge than give a bonus for winter holidays. There are not enough words to scourge this infantile, Ayn Randian nonesense from the page.
- s1artibartfast 3y agoNever in history have companies hired more employees for the sake of having more employees. This isn't a new modern or even libertarian hypothesis. Do you think people in 1000 bc hired more employees than they needed just maximize headcount. Of course not. You want enough to get the job done and not more.
- sackbut 3y agoPeople in 1000 BC is maybe not the best example here considering practically the entire population of Egypt was tasked with building or supporting the building of the pyramids among many other projects.
- s1artibartfast 3y agoI think that's just as good of an example as any. Do you think pharaohs hired and fed more slaves than they needed to build a pyramid just to maximize worker numbers, or so the extra could sit around and take it easy? Egypt had shops and Merchants too. Can you think of any time between then and now where things worked that way?
- tootie 3y agoEmployees do work and that work is meant to be profitable. If it is, then great. More employees, more profit. If it isn't, they get cut. That's exactly what CEOs are responsible for determining.
- behringer 3y agoI'm reminded of the song by Christy Moore about being laid off: It seems to me such a cruel irony / He's richer now then he ever was before / And now my cheque is spent, I can't afford the rent / There's one law for the rich, one law for the poor /
- jtode 3y agoIt's become tiresome, reading things that pretend this is not business as usual.
- vouaobrasil 3y agoMaybe it's a good thing to repeat it again and again so we can see how ridiculous it is. Sometimes people really need to be hit on the head.
- jvmfjvfjvf 3y agoWhy is it ridiculous when NFL and NBA players have $500MM contracts? Why shouldn't Google be allowed to pay these large contracts too?
- jtode 3y agoYou're conflating two kinds of people: one type is very talented and perhaps overpaid, the other has connections and has never done a shred of actual productive work in their life.
- jvmfjvfjvf 3y agoSundar Pichai managed many successful Google products before he became CEO.
- deleted 3y ago[deleted]
- gkoberger 3y agoThis isn't really a surprise. We've created a society that depends on growth. CEOs sign up for a job where they're responsible for growing a company, so they're obviously the type to value growth and want more for themsleves too – there's not a lot of CEOs who do it out of the goodness of their hearts. The investors, from the board down to individual nameless shareholders, all demand more money every quarter... even the employees want growth so their equity is worth more and they can get a raise. I don't think most people are Gordon Gekko types... it's mostly normal people who depend on a 401k or a pension or their house to appreciate in value. Even just cost-of-living salary adjustments is a form of growth. That money has to come from somewhere. There's no limit to the growth; there's no Good Enough. Nobody at Apple or Amazon has ever said "Hey, we did it, we won capitalism! Congrats!". There's always more to grow. There's literally no incentives for anyone, from employee to investor to CEO, to do anything but maximize growth. We don't celebrate companies that don't do layoffs, and the ones who do take a quick hit followed by a WSJ article the following quarter talking about how they hit their revenue goals. It's a depressing treadmill that keeps speeding up. But my point is... this is a symptom of a much bigger mindset we have, mainly in America. We all read this and are upset, but we are propping it up indirectly... via stock portfolios, 401ks, pensions, salary, equity, etc. Growth is good! But unbridled, never-ending growth is exhausting.
- Brybry 3y agoI don't think this is true for all of us, possibly not even for most people in the US. I know plenty of people who took lower paying jobs because they valued other things more than "growth": quality of life, family, passion, etc. I know people who have enough to meet their needs and are not actively working towards having more. People who retire by "aging in place" who do not care about the value of their home because they have no intention of selling it while they're alive.
- Calavar 3y agoI think this is somewhat naive. The growth mindset pervades the entire economy, and virtually everyone's interests are bound into it one way or another. Yes, of course there are people who prioritize lifestyle over chasing money. No one will debate that. But if those people's retirement plans are dependent on a 401k or drawing payments from a pension fund and not just cash savings, then they are amongst the growth-obsessed shareholders, whether they realize it or not.
- melenaboija 3y ago> Alphabet CEO Sundar Pichai was awarded compensation worth more than $225 million in 2022 I know this has been discussed here and 225MM is like the salary of 1000 employees making 200K for only one year, it is stock which is volatoile, that the salary of a CEO is impossible to measure, bla bla bla. But holy guacamole, whatever is the angle I look at it 225MM pear year does not make any f_ing sense to me and it is simply obscene for the 99.99% of the world population as would be enough to retire 5 or 6 generations of regular people.
- PartiallyTyped 3y agoThe claim is that you want the CEO to be aligned with the shareholders, and therefore you incentivize them with high salaries. Who cares about future shareholders or consequences for that matter when you earn 225MM ? Go move to some country that doesn't tax capital gains, sell it all, and live on 4% of it, which is 9MM per year; live like a king, buy absurd amounts of land and multiply your passive income. Obscene is an understatement.
- ethanbond 3y agoNot to mention you can keep CEOs “aligned with shareholders” by firing them if they behave in ways that are misaligned.
- PartiallyTyped 3y agoCEOs usually don't join without a golden parachute, and shareholders seem to only care about immediate gains. To see the insanity, Selipsky in Q1 AWS all hands was talking about growth of the rate of growth, i.e. second order. Not steady income, not income increasing (which is already exponential across years), but super-exponential; i.e. 20% , then 25%, then 30% growth. Who cares about sustainable and organic growth! We have to milk those pesky engineers and all our customers!
- vouaobrasil 3y agoThat makes sense to you and me but...if the world were only populated by people who were happy to just have enough to live a comfortable life as soon as they could, or even a very rich life as soon as they could cash out, then we would not have half the insanity we do today. And Sundar Pinchai and other CEOs could have quit a long time ago if they wanted to do that. If I were in the place of ANY CEO today of Google, Microsoft, Facebook, of course I would quit immediately with far LESS money and do something else....but they don't, speaking of the incredible pathology that lies within them.
- romafirst3 3y agoBillionaires are a choice and CEOs earning 225 million while sacking swathes of employees are a choice. There is relatively little sympathy in these instances though because the laid of people are shockingly rich engineers (by normal people’s standards) but this is how you get a revolution.
- romafirst3 3y agoNot sure why I’m getting downvotes, maybe a lot of people think they might someday become alphabet CEO and need to protect their future wealth. Some /s there but I honestly don’t understand the support base for the hyper rich. Regardless, insane wealth inequality is exactly how you get revolutions.
- baby 3y agoI know for a fact that people in the Csuite of medium size companies can easily make 400k/month total comp (specifically if they’re public companies, but private companies have outrageous paychecks also). Not even talking about the CEO, and not even talking about FAANGs and similar companies. Chances are that the leadership team of your company is making an absurd amount of money.
- deleted 3y ago[deleted]
- bambataa 3y agoThat’s $5m/y. Nick Clegg makes not much more for being Facebook’s global punching bag. Not doubting your sources but why are they so generous?
- baby 3y agoThat one is about employees that were vesting before the company went public, but other outrageous paychecks: because this is how leadership teams are paid, and their contracts often include a year of salary if they leave the company.
- JJMcJ 3y agoWriter named Graef Crystal, who for many years had been a compensation advisor to executives who were negotiating their employment contracts, estimated that each extra dollar the CEO received ended up costing the corporation $32. Extra pay to other C-Suite occupants so they can keep pace with the CEO, more elaborate staffs, more lavish travel. So it absolutely is not a rounding error.
- bradleyjg 3y agoAlphabet CEO Sundar Pichai was awarded compensation worth more than $225 million in 2022, which marked a staggering 3,474% increase from the previous year, making him the nation’s highest-paid CEO, according to Equilar data. There’s a whole rabbit hole to go down, but CEO compensation is not well defined. In this case it’s likely that Pichai was granted options with a multiyear vesting schedule, plus perhaps performance targets, and the entire net present value is being counted for 2022. Meanwhile he likely vested substantial options in 2021, but since it was granted in a prior year it’s not counted as compensation in that year. This kind of accounting makes for extremely lumpy numbers and the evergreen opportunity to write articles about 3400% increases!!1! I don’t think it’s a particularly useful way to think about executive compensation and we shouldn’t pay attention to such articles.
- one_level_deep 3y ago[dead]
- HDThoreaun 3y agoI disagree. Yes we should think about option grants differently, but not that differently. At the end of the day I don't think anyone would say Sundar has been that much better than his replacement level CEO. Certainly not better enough to deserve 225 million in equity. The stock is up 10% this year, still below 2021 levels.
- bradleyjg 3y agoDo you think he “actually” earned less than one million in 2021? Because that’s what accepting this framing means. Did his pay actually increase? We don’t know. Maybe I’m an odd duck, but I expect journalists to journalist.
- ztrww 3y agoDepends how you measure “earning”. If we look at Google’s stock price and growth in relation to its competitors he possibly cost significantly more money to the company than he was paid.
- whimsicalism 3y agoI am extremely skeptical that at the higher levels of CEO pay there is any marginal utility. I just don’t think the improved management quality you get from an additional $1M is actually making the company more than $1M in profits. Seems like a failure of markets
- vouaobrasil 3y agoThat might be true if the goal were to maximize the profits and long-term health of companies to deliver value to society. It's more as though the goal is to maximize shareholder wealth and minimize the dependence on expensive employees by encouraging a bitter atmosphere that in turn results in high turnover, which is in turn good for profits because it uses up the best 5-10 years of a young person's life in generating new ideas before they wake up and realize that they are not in any way contributing to the good of society.
- JJMcJ 3y agoWhen Ford went public around 1956, the man who ran that got $250,000, about $2.8 million today, with much higher taxes than today. But he also got a thank you letter from Henry Ford II, so he had that going for him. That was the largest IPO at the time, very complicated. I believe all the shares offered publicly were held by the Ford Foundation, for complicated tax and dynastic reasons. But the main point here is how little the manager of the offering received. Imagine that today. $2.8 million would be nothing.
- jokoon 3y agoI'm tired of capitalism. The less it's regulated, the more it opens the road to planned economy or tightly managed socialism. I'm glad I live in Europe. At least I can just retreat from this system with welfare and still eat and have a roof. Every time alternatives to capitalism are brought up, every time people come and say Stalin was worst than Hitler. It's impossible to discuss change or alternatives.
- xcdzvyn 3y agoI really wish there were some platform to responsibly argue things. It could also offer establishing axioms to build arguments out from and whatnot. I'm not aware of anywhere for people to argue their positions on most things in a civil manner.
- zmnd 3y agoYou are saying like it's any different in Europe. Dassault Systèmes CEO Bernard Charlès makes €20.6m with company revenue of $6.05 billion. For reference, Google CEO made $226 million (~10x) with company revenue of $279.8 billions (~46x).
- hgs3 3y ago> I'm tired of capitalism. I'm tired of Free Market capitalism. The problem is companies have become too large and command too much political influence. We need proactive laws that break up companies if they grow beyond a certain size criteria. Ideally, the criteria would be aggressive enough to kill the corporation leaving behind mostly small businesses with a low barrier of entry for new competitors. Increased competition would mean lower prices, more product variety, more opportunities for employees to find quality employers or become small business owners themselves, and the elimination of Big Corp's big money political influence. Companies are their "best" when small and nimble so why not force them to remain that way? If this came to pass there might be less need for socialism.
- slowmovintarget 3y agoThe problem is not capitalism. The problem is perverse incentives of Wall Street. Why did these CEOs get huge pay bumps? They improved their primary product: shares of the company. So many of these publicly traded companies don't have the product or service they claim to sell as their highest-priority market. Instead it is the stock market that has become their primary concern which incentivizes short term "value" extraction over everything else, including viability of the company's goods sold in consumer markets. I don't know how we put the genie back in the bottle. Perhaps taxing capital gains from securities as income? Were these companies private, they wouldn't have hired to trend, and fired to trend. They would have ensured their focus on their actual product, and their ability to continue to compete and deliver it. I don't know why Apple seems able to do this. Perhaps they've just hit escape velocity.
- nicechianti 3y ago[dead]
- Geezus_42 3y agoIs anyone surprised?
- 23B1 3y agoI've been working on a solution for this, have pitched a handful of investors and every time I'm met with blank stares, probably because what I'm proposing would cut into their own dividends. I know this comment will get lost in the sauce, but if you know an investor who is brave, cares about staving off the forthcoming proletarian revolution, I'd love to hear your ideas.
- charles_f 3y agoI don't know one but I'm curious to hear about it
- jerojero 3y agoYou know how the USA has a President? Switzerland has 7. What is the role of the CEO? Is it to make decision? Is it to be a public facing role, a representative of the company as a whole? These can all be replaced with collective bodies coming from the firm itself. There's a lot of structures of governance that decentralise the power of the firm and they work pretty well. But the current system is not really viewed as a problem for the people who participate in it. The boards, the CEOs, etc. these are not positions that truly need talent and shrewdness these are positions that exist for people to aspire to. This way, the bulk of the people in the firm have a clear structure to look up to. It's not that Sundar Pichai does work worth 225M a year, it's simply that he happens to be in the position of the CEO of Alphabet. It can be anyone (anyone in those upper circles).
- ztrww 3y ago> The boards, the CEOs, etc. these are not positions that truly need talent and shrewdness these are positions that exist for people to aspire to. And yet depending on who’s the people in these positions are the company might earn up to hundreds of billions more or less over a few years. The decisions Pichai does or does not make clearly can cost/bring in more than just 200-300 million. > These can all be replaced with collective bodies coming from the firm itself. Companies run by committees are generally notoriously bad at innovation (just look at Europe..)
- paulpauper 3y agobig tech CEO pay is almost always going up, so it's only coincidental that it came before layoffs
- kibwen 3y agoMaybe Google employees should take a vote and replace their C-suite with an AI. It would pay for itself within days. And yet, somehow, why do I get the funny feeling that of all the jobs that will be made obsolete by AI, "CEO" somehow isn't one of them?
- somewhereoutth 3y agoProbably we can argue the rights and wrongs of individual cases, but surely now is the time for swinging wealth taxes. Clearly the system has got out of control, and everyday people are suffering while the rich lead gilded lives. 50% on everything over say 2MM, into a sovereign wealth fund. Prison for attempts at evasion. Maybe next year we won't do another 50% on what they have left.
- rullelito 3y agoAnd the justification to take someone's money is that there are other poor people? This is not how you solve a problem.
- liftIO 3y ago> $225 million in 2022, which marked a staggering 3,474% increase from the previous year This is obviously a "creative" calculation done in order to get the highest number possible, which makes the best clickbait. I'm disappointed that so many Hacker News commenters are stupid enough to fall for this.
- baazaa 3y agoI don't mind inequality but I hate this is always framed as 'the market' at work. There is no market here, there's no price discovery, and the people actually paying Pinchai's salary (shareholders) have incredibly little say in the matter. No economist would ever assume governments exclusively act in the public's best interest, but it's bizarrely common to assume boards and senior executives act in the shareholders' best interest.
- catchnear4321 3y agotypically there is a reaction to ceo pay being completely removed from reality. is it? ceo is typically a shit job. nobody likes you except for obsessive weirdos, power-mad sycophants, etc. nobody nice. (which, when you consider the ceos…) one year of ceo pay is enough to retire from the shit job. why come back? so ceos must also typically be driven by absurd dollar amounts. which, given finite life spans, the ceo would never be able to spend it all. so why would a ceo accept a multi year deal for more money than god? that’s right. ceos are suckers.
- nojvek 3y agoSundar Pichai is a CEO of Google that makes 75B per quarter or ~300B annually. That is $300,000,000,000. Him earning 225M worth of shares is a fair compensation for the head of a company who's decisions can earn/lose the company billions. Same with Satya Nadella, Tim Cook and the variety of other CEOs. We only see the news. The richest who own the bulk of stock market make billions per day at times when the share price rises a few %. US was built on the idea that if you can create value, you get to capture some % of the value. Sure the rich get richer and they have big advantage, but if you create the next internet sensation, that billions is yours. We should definitely fighting against Big Tech when they abuse their monopoly like power (which they do), but when a company creates great technology to move humanity forward we should celebrate it. It's not a black and white scenario though. Big Tech has plenty of good and bad depending on which perspective we look at.