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I always found it interesting that the Norwegian pension fund, which has $1.47 trillion AUM, paid its CEO approximately $650k in salary. No management fee, no "

I always found it interesting that the Norwegian pension fund, which has $1.47 trillion AUM, paid its CEO approximately $650k in salary. No management fee, no "beat the market" bonuses, just a regular salary. Now, some will say that he, the CEO, is already independently wealthy (having owned a hedge fund and being worth around $700m) and just took the job for the prestige, but it's been the same with the previous directors - only they weren't loaded. Others will also argue that, hey, it's just a pension fund - their goal is not to innovate, or beat competitors, they just manage the money in a way that keeps up with the market, and mainly manage risk. $650k a year is what, VP salary in some no-name hedge fund or private equity firm? Small business CEOs are making more than that. But some people are taking that job, and doing it just as well as their competitors at fund with 0.01% of the AUM, but at 1%-0.1% of the salary.

woah 3y ago
Whether they are being paid 0.000044% ($650k) of AUM or 0.0044% of AUM ($65m) doesn't really seem like it would make much of a difference to the fund's performance. If it is possible to get better performance by paying more, it seems like this would be a good idea. In Norway's case, the pension fund is a really huge deal for the country, and managing it is probably like being a high level politician in some ways. You are probably present at all the most important events, and regularly having dinner with the president. They could probably easily pay $0. I don't think you can extrapolate this out to others.
- generic92034 3y ago
  > If it is possible to get better performance by paying more, it seems like this would be a good idea. That is a pretty big "if". And also it seems to me, that if shareholders have only one button to influence anything in their corporation, they tend to turn it to "high", even if there is no cause-effect relationship to high performance.
- rurp 3y ago
  But how do you know that someone will be an above average manager, relative to others with a similar track record, pedigree, firm handshake or whatever? Of course the answer is that we don't know, it's spending tens of millions of dollars for a chance at getting an above average leader, and maybe ending up with a below average one instead.
  - woah 3y ago
    Raising the management cost by a few thousands of a percent of AUM for a few percent chance of having a few percent better yield seems like it might make sense
runako 3y ago
> $650k a year is what, VP salary in some no-name hedge fund or private equity firm? Small business CEOs are making more than that. $650k is sub-exec management in much of corporate America now. Especially in tech. Europe has a different cultural range around employee compensation. I haven't been able to determine why that is the case.
- mrguyorama 3y ago
  >Europe has a different cultural range around employee compensation. I haven't been able to determine why that is the case. Primarily because they value a hundred different things way higher than "Make all the money in the world" on their list of priorities.
  - runako 3y ago
    That would make some kind of sense except they do in fact have very profitable companies in Europe. The question is more around why do employees of a company like Goldman Sachs earn less in Europe than they do in America for the same work. (Setting aside the European colonial history that could be summarized as "taking all the money from the world.")
    - p_j_w 3y ago
      >That would make some kind of sense except they do in fact have very profitable companies in Europe. What GP suggested they value doesn't preclude this. Not valuing making all the money in the world for yourself personally doesn't also mean you believe "eh, just run the company into the ground, it doesn't matter." >Setting aside the European colonial history that could be summarized as "taking all the money from the world." 1. Widespread cultural attitudes change all the time. 2. This was not driven by the populace as a whole, it was driven by the very wealthy.
pcurve 3y ago
CEO pay always grew inline with worker's pay until 1978 when trend started to break. Coincidentally, 1978 is when 401K was introduced. https://www.epi.org/publication/ceo-pay-in-2021/ https://www.epi.org/publication/ceo-pay-in-2021/ Then in 1990s, all hell broke loose and the gap completely blew open between avg worker and CEO pay.
- tornato7 3y ago
  Almost relevant: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

woah 3y ago

Whether they are being paid 0.000044% ($650k) of AUM or 0.0044% of AUM ($65m) doesn't really seem like it would make much of a difference to the fund's performance. If it is possible to get better performance by paying more, it seems like this would be a good idea. In Norway's case, the pension fund is a really huge deal for the country, and managing it is probably like being a high level politician in some ways. You are probably present at all the most important events, and regularly having dinner with the president. They could probably easily pay $0. I don't think you can extrapolate this out to others.

generic92034 3y ago
> If it is possible to get better performance by paying more, it seems like this would be a good idea. That is a pretty big "if". And also it seems to me, that if shareholders have only one button to influence anything in their corporation, they tend to turn it to "high", even if there is no cause-effect relationship to high performance.
rurp 3y ago
But how do you know that someone will be an above average manager, relative to others with a similar track record, pedigree, firm handshake or whatever? Of course the answer is that we don't know, it's spending tens of millions of dollars for a chance at getting an above average leader, and maybe ending up with a below average one instead.
- woah 3y ago
  Raising the management cost by a few thousands of a percent of AUM for a few percent chance of having a few percent better yield seems like it might make sense

runako 3y ago

> $650k a year is what, VP salary in some no-name hedge fund or private equity firm? Small business CEOs are making more than that. $650k is sub-exec management in much of corporate America now. Especially in tech. Europe has a different cultural range around employee compensation. I haven't been able to determine why that is the case.

mrguyorama 3y ago
>Europe has a different cultural range around employee compensation. I haven't been able to determine why that is the case. Primarily because they value a hundred different things way higher than "Make all the money in the world" on their list of priorities.
- runako 3y ago
  That would make some kind of sense except they do in fact have very profitable companies in Europe. The question is more around why do employees of a company like Goldman Sachs earn less in Europe than they do in America for the same work. (Setting aside the European colonial history that could be summarized as "taking all the money from the world.")
  - p_j_w 3y ago
    >That would make some kind of sense except they do in fact have very profitable companies in Europe. What GP suggested they value doesn't preclude this. Not valuing making all the money in the world for yourself personally doesn't also mean you believe "eh, just run the company into the ground, it doesn't matter." >Setting aside the European colonial history that could be summarized as "taking all the money from the world." 1. Widespread cultural attitudes change all the time. 2. This was not driven by the populace as a whole, it was driven by the very wealthy.

pcurve 3y ago

CEO pay always grew inline with worker's pay until 1978 when trend started to break. Coincidentally, 1978 is when 401K was introduced. https://www.epi.org/publication/ceo-pay-in-2021/ https://www.epi.org/publication/ceo-pay-in-2021/ Then in 1990s, all hell broke loose and the gap completely blew open between avg worker and CEO pay.

tornato7 3y ago
Almost relevant: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/