4 ms·

I think it is a misunderstanding that the job market is optimizing for fairness: it is not. Executive pay is supply and demand. The mayor is being paid $450k b

I think it is a misunderstanding that the job market is optimizing for fairness: it is not. Executive pay is supply and demand. The mayor is being paid $450k because a person with the necessary skills was willing to take that salary (after fighting off opponents) to become mayor. Mayor comes with prestige, so more people want to be mayor, and $450k is not a terrible incentive to go after. If the government paid $80k a year, no one would become mayor. If they paid $1m a year, too many qualified people might be interested, or – the right people might become interested. Imagine you’re a CEO who successfully ran and sold a business for $250m. You now have at least $25m. Why would you ever want to work an intense job again? Being CEO is exhausting. Executives are paid a lot of money because they’ve already made a lot of money: if you want to incentivize them there has to actually be something at stake. That said, these decisions are usually made by a board, which is small and has limited knowledge. There is plenty of room for them to miscalibrate, too, but paying too much for an executive is bad business. Paying too little is, too.

ceejayoz 3y ago
> If the government paid $80k a year, no one would become mayor. I very much doubt this. New Hampshire legislators get $100/year, since 1889. Still plenty interested in the job.
- conradev 3y ago
  Yeah, I would do public service for free, personally, but I have the means to. It’s an interesting filter to pay nothing, for sure! At that point, it is filtering for people who can afford their own lifestyles without a job
Jensson 3y ago
> That said, these decisions are usually made by a board, which is small and has limited knowledge. The board is usually made up of other executives or former executives. This group sets each others salaries unlike all other professional categories.
- denton-scratch 3y ago
  As far as I can tell, CEO remunerations are determined by "the going rate"; and the directors on the remuneration committee are fine with that, because they're also CEOs for some other firm, or hope to be. So the going rate goes up, up, up. Now, here in the UK, the remuneration of University heads (Principal, Master, Dean, or whatever title) are having their pay determined by the going rate for CEOs. These are people who do the job for a couple of days a week; they aren't exactly struggling to get on top of the workload. Same for the bosses of the jungle of pseudo-companies that make up the modern NHS; they're all basically employed by the taxpayer. They've employed so many managers that their organizations are hopelessly top-heavy, and yet they need huge remuneration. Can they not delegate? I thought the ability to delegate was an essential skill for any manager.
vkou 3y ago
If executive pay is supply and demand, and has risen stratospherically over the past 40 years, why has the supply of executives failed to meet demand for them? Are we not sending enough people to MBA school? Is there a funnel problem in our educational system? Do we need to open up more opportunities for skilled immigrants to work here in executive roles?
- conradev 3y ago
  The US has terrible cost disease in a lot of industries, and I would lump executive compensation in with those industries. I don’t think I’ve seen a good coherent theory for this specifically
Escapado 3y ago
I should have been more clear on what I mean: I am well aware that the job market is not optimizing for fairness but that is what people often judge situations on. I do understand how it came to all of this and how the situation is justified but just posed that if we turned our back to completely free markets and imagined a structure based on "fairness" then things should probably be different. Furthermore I disagree with the argument that nobody would want to work an intense job while being "underpaid". Plenty of labor is really intense and pays minimum wage or barely over.

ceejayoz 3y ago

> If the government paid $80k a year, no one would become mayor. I very much doubt this. New Hampshire legislators get $100/year, since 1889. Still plenty interested in the job.

conradev 3y ago
Yeah, I would do public service for free, personally, but I have the means to. It’s an interesting filter to pay nothing, for sure! At that point, it is filtering for people who can afford their own lifestyles without a job

Jensson 3y ago

> That said, these decisions are usually made by a board, which is small and has limited knowledge. The board is usually made up of other executives or former executives. This group sets each others salaries unlike all other professional categories.

denton-scratch 3y ago
As far as I can tell, CEO remunerations are determined by "the going rate"; and the directors on the remuneration committee are fine with that, because they're also CEOs for some other firm, or hope to be. So the going rate goes up, up, up. Now, here in the UK, the remuneration of University heads (Principal, Master, Dean, or whatever title) are having their pay determined by the going rate for CEOs. These are people who do the job for a couple of days a week; they aren't exactly struggling to get on top of the workload. Same for the bosses of the jungle of pseudo-companies that make up the modern NHS; they're all basically employed by the taxpayer. They've employed so many managers that their organizations are hopelessly top-heavy, and yet they need huge remuneration. Can they not delegate? I thought the ability to delegate was an essential skill for any manager.

vkou 3y ago

If executive pay is supply and demand, and has risen stratospherically over the past 40 years, why has the supply of executives failed to meet demand for them? Are we not sending enough people to MBA school? Is there a funnel problem in our educational system? Do we need to open up more opportunities for skilled immigrants to work here in executive roles?

conradev 3y ago
The US has terrible cost disease in a lot of industries, and I would lump executive compensation in with those industries. I don’t think I’ve seen a good coherent theory for this specifically

Escapado 3y ago

I should have been more clear on what I mean: I am well aware that the job market is not optimizing for fairness but that is what people often judge situations on. I do understand how it came to all of this and how the situation is justified but just posed that if we turned our back to completely free markets and imagined a structure based on "fairness" then things should probably be different. Furthermore I disagree with the argument that nobody would want to work an intense job while being "underpaid". Plenty of labor is really intense and pays minimum wage or barely over.