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It depends how they're counting. There was an example in Money Stuff this week where a CEO got a pay package "worth $110 million". It's actually made of stock

It depends how they're counting. There was an example in Money Stuff this week where a CEO got a pay package "worth $110 million". It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported. …But the share price only reached $66. So in fact he was paid zero, and he quit. (Well, $1.5 million in cash.) https://www.wsj.com/business/ceo-with-110-million-pay-package-is-suddenly-out-7907c56f?mod=hp_lead_pos4 https://www.wsj.com/business/ceo-with-110-million-pay-packag...

vel0city 3y ago
> paid zero > paid $1.5 million in cash These are two wildly different things.
- outside1234 3y ago
  Yes - that is serious tails I win heads you lose sort of numbers
- jjoonathan 3y ago
  Just think of all the risk that executive took by potentially only earning $1.5 million dollars! EDIT: called it, MichaelDickens just made this argument unironically.
- MichaelDickens 3y ago
  $1.5 million is approximately $0 in comparison to the originally-quoted $110 million—it's less than 2% of the original amount.
  - ceejayoz 3y ago
    And yet, a massively life-changing annual salary level for almost all Americans.
  - ramranch 3y ago
    You don't spend a percentage, you spend a fixed amount. $1.5 million is enough to live in a nice house, eat what you want, send your kids to nice schools, Aruba in the summer and Aspen in the winter, and still have enough to buy a very fast car. It's easier to focus on EV once you live this life.
    - astrange 3y ago
      Everyone read that as $1.5 million in salary but I didn't mean to say he got that every year. He got it once.
      - vel0city 3y ago
        So? It's still more than most families will make in a decade. How many years was that $1.5M compensation for? What other compensation did he get?
  - vel0city 3y ago
    Being honest, I'd really have to know what kind of timeframe that $1.5M was paid out. Was that a single year? 5? 10? It changes my opinion, slightly. If its $1.5M in a single year, I have absolutely no tears to shed. If that was 5 years, that's $300k/yr in compensation. A very comfortable salary in just about every place in the country. Once again, I probably have no tears. If that was 10 years, that's $150k/yr. Ok, if you're expected to live in Manhattan or whatever, I'll agree that's pretty tight. Still though, that's a couple times the average household income in the US. Congratulations on being a bit closer to a plebeian. Boo hoo, guy who could have had generational wealth just had to live like the rest of us. What a tragedy. Truly zero income, being more than twice the average household income for a single earner without even thinking of other compensation he might have received. I can't imagine this was some kind of performance pay over 15-20 years, so his pay has to be in this. I don't have a WSJ subscription, so I can't comment further on it.
- queuebert 3y ago
  "A million here and a million there, and pretty soon you're talking real money." (To paraphrase.)
aaomidi 3y ago
Right, but in general the CEO doesn’t really do much to the stock price. If the general market is up, it’s going up. If the market is down, it’s going down. How many companies really break that relationship in their market sector? So tldr, ceo pay is based on the economic cycle rather than how the company does.
- borisjabes 3y ago
  Some public CEOs comp packages are defined by them exceeding $SPY so boards do expect more than just the economic cycle.
  - somebodythere 3y ago
    50% of SPY constituents are going to beat SPY. That in itself doesn't imply the CEO is a meaningful factor in company performance.
    - HDThoreaun 3y ago
      This isn’t true because of the weighting. If apple doubles in value SPY will be up 8% from that alone. It’s easy to see a scenario where one massive company has an incredible year and every other company returns below the average.
      - vkou 3y ago
        Or, alternatively, one massive company has a bad year, and everyone else comes out smelling like roses. On average, 50/50 is a pretty decent benchmark here.
- WalterBright 3y ago
  > but in general the CEO doesn’t really do much to the stock price Steve Jobs, Bill Gates, Elon Musk, Satya Nadella, etc. > ceo pay is based on the economic cycle rather than how the company does You can always start your own corporation, name yourself CEO (all you gotta do is file some paperwork and pay an annual fee) and rake in the dough for doing nothing!!
spondyl 3y ago
> It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported. It gets a little weirder than that I suppose since you might have a great deal of shares in a company, which you never exercise so you could say that money doesn't really exist until exercised. You can however use those shares as collateral for a mortgage or other line of credit which is a pretty common tactic for wealthy people to avoid paying income tax that they otherwise would if they were to sell said shares.
- astrange 3y ago
  In this case he didn't get any shares. If he'd used the options to get a mortgage then he's got a pretty big hole in his pocket when they became worthless.
- taf2 3y ago
  Isn’t that kind of lending what caused the Great Depression? Pretty sure you can’t take a loan out on a promise of an option value…
- WalterBright 3y ago
  Shares can and do go up and down quite a bit. I bought heavily into one tech company where the shares went down 90% in a couple months. It was pretty devastating for me. > You can however use those shares as collateral Only shares that you own, not have an option to buy. And only a portion of the shares, and if your shares become worth less than the loan, you still owe the money, and they'll come after any other assets you have. > you might have a great deal of shares in a company, which you never exercise You're confusing owning shares with having an option to buy shares. They're very different. You'll also owe income tax on the difference between the exercise price and the current price of the shares. (A friend of mine didn't know that, and consequently lost his house.)
olliej 3y ago
As someone pointed out "1.5 million in cash" for not doing the job you were hired for is .. not zero. I'm fairly sure I could achieve the same results for considerably less. Moreover making compensation dependent on stock price movement encourages corruption and fraud - look at the numerous Enrons and other financial claims. All of which left the majority of those responsible enriched while destroying the lives of others.
- wins32767 3y ago
  > I'm fairly sure I could achieve the same results for considerably less. I'm highly skeptical of that. Not driving the company value to zero is worth a significant amount of money; anyone who has worked under a bad executive or CEO can tell the difference between one that didn't accomplish aggressive goals and one that's objectively bad. If you have a bunch of executive experience, maybe you'd be able to replicate that CEO's performance, but absent that it's more likely you'd cause more harm than just not making the goal.
  - chii 3y ago
    well the CEO's been set a target share price, and he did not reach it. Dunno if you could consider that as failing.
  - ipaddr 3y ago
    The CEO here is the least likely to be responsible for the increase/decrease in profits/value in that one year. The best you can hope for is a pr boost. Whatever strategy change would not be visible in the short period. Key hires there is not enough time for an impact. Whatever value increase is going to come from vps and everyone down the line. Why not give them the upside on the value they create?
  - marcus_holmes 3y ago
    > If you have a bunch of executive experience, maybe you'd be able to replicate that CEO's performance, but absent that it's more likely you'd cause more harm than just not making the goal. I doubt this is true. Organisations have inertia, and getting one to change direction or do something different is remarkably difficult. (source: I have been hired as a CEO to change the direction of an organisation. It was difficult). I strongly suspect that an average person being put into the CEO role would do fine as long as the organisation was basically OK. They'd make mistakes, sure, but everyone makes mistakes. The organisation has ways of limiting the damage of mistakes. The hard bit about being CEO is taking full responsibility for your decisions with no feedback. You can deal with this in a wide variety of ways; arrogance, narcissism, authoritarianism, or humility, honesty, and teamwork. We tend to see the first three because those kinds of personalities cope well with this kind of difficulty. But that doesn't mean this is the best way to deal with it.

vel0city 3y ago

> paid zero > paid $1.5 million in cash These are two wildly different things.

outside1234 3y ago
Yes - that is serious tails I win heads you lose sort of numbers
jjoonathan 3y ago
Just think of all the risk that executive took by potentially only earning $1.5 million dollars! EDIT: called it, MichaelDickens just made this argument unironically.
MichaelDickens 3y ago
$1.5 million is approximately $0 in comparison to the originally-quoted $110 million—it's less than 2% of the original amount.
- ceejayoz 3y ago
  And yet, a massively life-changing annual salary level for almost all Americans.
- ramranch 3y ago
  You don't spend a percentage, you spend a fixed amount. $1.5 million is enough to live in a nice house, eat what you want, send your kids to nice schools, Aruba in the summer and Aspen in the winter, and still have enough to buy a very fast car. It's easier to focus on EV once you live this life.
  - astrange 3y ago
    Everyone read that as $1.5 million in salary but I didn't mean to say he got that every year. He got it once.
    - vel0city 3y ago
      So? It's still more than most families will make in a decade. How many years was that $1.5M compensation for? What other compensation did he get?
- vel0city 3y ago
  Being honest, I'd really have to know what kind of timeframe that $1.5M was paid out. Was that a single year? 5? 10? It changes my opinion, slightly. If its $1.5M in a single year, I have absolutely no tears to shed. If that was 5 years, that's $300k/yr in compensation. A very comfortable salary in just about every place in the country. Once again, I probably have no tears. If that was 10 years, that's $150k/yr. Ok, if you're expected to live in Manhattan or whatever, I'll agree that's pretty tight. Still though, that's a couple times the average household income in the US. Congratulations on being a bit closer to a plebeian. Boo hoo, guy who could have had generational wealth just had to live like the rest of us. What a tragedy. Truly zero income, being more than twice the average household income for a single earner without even thinking of other compensation he might have received. I can't imagine this was some kind of performance pay over 15-20 years, so his pay has to be in this. I don't have a WSJ subscription, so I can't comment further on it.
queuebert 3y ago
"A million here and a million there, and pretty soon you're talking real money." (To paraphrase.)

aaomidi 3y ago

Right, but in general the CEO doesn’t really do much to the stock price. If the general market is up, it’s going up. If the market is down, it’s going down. How many companies really break that relationship in their market sector? So tldr, ceo pay is based on the economic cycle rather than how the company does.

borisjabes 3y ago
Some public CEOs comp packages are defined by them exceeding $SPY so boards do expect more than just the economic cycle.
- somebodythere 3y ago
  50% of SPY constituents are going to beat SPY. That in itself doesn't imply the CEO is a meaningful factor in company performance.
  - HDThoreaun 3y ago
    This isn’t true because of the weighting. If apple doubles in value SPY will be up 8% from that alone. It’s easy to see a scenario where one massive company has an incredible year and every other company returns below the average.
    - vkou 3y ago
      Or, alternatively, one massive company has a bad year, and everyone else comes out smelling like roses. On average, 50/50 is a pretty decent benchmark here.
WalterBright 3y ago
> but in general the CEO doesn’t really do much to the stock price Steve Jobs, Bill Gates, Elon Musk, Satya Nadella, etc. > ceo pay is based on the economic cycle rather than how the company does You can always start your own corporation, name yourself CEO (all you gotta do is file some paperwork and pay an annual fee) and rake in the dough for doing nothing!!

spondyl 3y ago

> It's actually made of stock options that vest if the share price went above $150, but the expected value was $110 million so that's what was reported. It gets a little weirder than that I suppose since you might have a great deal of shares in a company, which you never exercise so you could say that money doesn't really exist until exercised. You can however use those shares as collateral for a mortgage or other line of credit which is a pretty common tactic for wealthy people to avoid paying income tax that they otherwise would if they were to sell said shares.

astrange 3y ago
In this case he didn't get any shares. If he'd used the options to get a mortgage then he's got a pretty big hole in his pocket when they became worthless.
taf2 3y ago
Isn’t that kind of lending what caused the Great Depression? Pretty sure you can’t take a loan out on a promise of an option value…
WalterBright 3y ago
Shares can and do go up and down quite a bit. I bought heavily into one tech company where the shares went down 90% in a couple months. It was pretty devastating for me. > You can however use those shares as collateral Only shares that you own, not have an option to buy. And only a portion of the shares, and if your shares become worth less than the loan, you still owe the money, and they'll come after any other assets you have. > you might have a great deal of shares in a company, which you never exercise You're confusing owning shares with having an option to buy shares. They're very different. You'll also owe income tax on the difference between the exercise price and the current price of the shares. (A friend of mine didn't know that, and consequently lost his house.)

olliej 3y ago

As someone pointed out "1.5 million in cash" for not doing the job you were hired for is .. not zero. I'm fairly sure I could achieve the same results for considerably less. Moreover making compensation dependent on stock price movement encourages corruption and fraud - look at the numerous Enrons and other financial claims. All of which left the majority of those responsible enriched while destroying the lives of others.

wins32767 3y ago
> I'm fairly sure I could achieve the same results for considerably less. I'm highly skeptical of that. Not driving the company value to zero is worth a significant amount of money; anyone who has worked under a bad executive or CEO can tell the difference between one that didn't accomplish aggressive goals and one that's objectively bad. If you have a bunch of executive experience, maybe you'd be able to replicate that CEO's performance, but absent that it's more likely you'd cause more harm than just not making the goal.
- chii 3y ago
  well the CEO's been set a target share price, and he did not reach it. Dunno if you could consider that as failing.
- ipaddr 3y ago
  The CEO here is the least likely to be responsible for the increase/decrease in profits/value in that one year. The best you can hope for is a pr boost. Whatever strategy change would not be visible in the short period. Key hires there is not enough time for an impact. Whatever value increase is going to come from vps and everyone down the line. Why not give them the upside on the value they create?
- marcus_holmes 3y ago
  > If you have a bunch of executive experience, maybe you'd be able to replicate that CEO's performance, but absent that it's more likely you'd cause more harm than just not making the goal. I doubt this is true. Organisations have inertia, and getting one to change direction or do something different is remarkably difficult. (source: I have been hired as a CEO to change the direction of an organisation. It was difficult). I strongly suspect that an average person being put into the CEO role would do fine as long as the organisation was basically OK. They'd make mistakes, sure, but everyone makes mistakes. The organisation has ways of limiting the damage of mistakes. The hard bit about being CEO is taking full responsibility for your decisions with no feedback. You can deal with this in a wide variety of ways; arrogance, narcissism, authoritarianism, or humility, honesty, and teamwork. We tend to see the first three because those kinds of personalities cope well with this kind of difficulty. But that doesn't mean this is the best way to deal with it.