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Frankly, I think this sort of thinking is wrong almost all of the time. I understand why hiring boards feel they have no choice, but the reality is, outside of
by nonameiguess 3y ago
Frankly, I think this sort of thinking is wrong almost all of the time. I understand why hiring boards feel they have no choice, but the reality is, outside of maybe 15 people from the past century, there are no clear number ones and number twos. Talent ranking just isn't that accurate. Pro sports has exactly the same problem. If you happen to actually get a LeBron James or Shohei Ohtani, then yeah, they absolutely deserve probably 50 times what they'll ever actually get paid. They're worth more than the rest of the team combined.
But if you don't have them, you're locking yourself into a supermax contract for Russell Westbrook or John Wall and scuttled your franchises hopes of winning for at least the next decade until you get the balls to suck it up and blow up the entire organization and admit you were wrong.
A tiny number of elite individuals are legitimately worth all the damn money in the world, but they're nearly impossible to identify in advance. But that promise sucks in the money men to pay these ridiculous salaries out of sheer hope that maybe they'll strike gold even though they almost never do. Hell, it's even worse in business because someone can just get lucky for a really long time. Market conditions you didn't even see coming might nonetheless make you look like a genius just for making a correct guess. At least in sports the winners are actually the best at what they do.
- gniv 3y agoI think in this context second-best CEO is euphemism for crook. Having those could be a multi-billion dollar liability.
- csharpminor 3y agoI completely agree that it’s a crap-shoot, but again from the perspective of a board they’d rather cover their bases and over pay. Especially when this compensation is a fractional percent of the company’s revenue. The other factor is that when you’re on an exec search team, you just look at other executives in the same industry. There might only be 5-10 total that have similar qualifications and are in your comp range. The core issue is that power and relationships within a given industry are typically very concentrated so there’s a limited pool to draw from if you want an exec (and most boards do) who brings that.