3 ms·

Agree with the title but like none of the rest. Do they think that people joining family businesses do a good job somehow? There are countless stories of people

by ajkjk 3y ago

Agree with the title but like none of the rest. Do they think that people joining family businesses do a good job somehow? There are countless stories of people inheriting things and ruining them because they don't have the acumen of the original creator. But basically agree that, yes, CEOs don't have skin in the game. In fact almost everyone in big corporations doesn't. It seems to become more about not taking risks that would be socially embarrassing than about doing a good job. But what could give them "skin"? Maybe fierce competition? But that's kinda lame. With efficiency gains from technology we should be able to live in a world that's not based around fierce competition. Better than that is fierce accountability. From who? Everyone you can think of. In particular, accountability that they do their jobs right, make the right choices, charge fair prices, treat employees well, treat society and the earth well, etc. If you think about it... there is no reason in principle that corporations ought to be secretive. Since they should be competing on "honest work", not on tricking and one-upping each other, it seems to me that they should be entirely open and judged for their daily behavior. The trick, of course, is giving that accountability any teeth.

tstrimple 3y ago
> There are countless stories of people inheriting things and ruining them because they don't have the acumen of the original creator. Some of my most "entertaining" work experiences have been a direct result of this. In the latest example, the son of the founder went so far as to create a motorcycle dealership on the property of his completely unrelated inherited business in the parking lot of their HQ location because he was more interested in motorcycles than the business he inherited. This is a relatively small family company ($250MM/year net) that also has multiple private jets for the C-Suite of friends of the inheritor to ride around in. One of the most moral crushing experiences is when everyone sees the direction a company is taking, but we all still go through the steps we all know will be futile regardless because the money all spends the same in the end.
darth_avocado 3y ago
The problem is that in the current era, we only look at short term profits and losses, which makes it difficult to evaluate competency. The comparison of CEO vs Owner/Founder/Guy with the name on the company, should be looked from the short/long term benefits to the company. A lot of CEOs are compensated based on stock value and quarterly results, which can be gamed quite easily. You can improve profit margins if you fire half your staff, but will that ensure your company lasts a decade? Probably not. Once you take a long term view, you can align the incentives that way, and automatically ensure the CEOs have more skin in the game. E.g. instead of $3M joining bonus, move it to a bonus if you’re still a CEO after 3 years.
johnnyanmac 3y ago
>But what could give them "skin"? they bury their own lede at the end but they elaborate on it: > Shame as "Skin" Japan is (in)famous for this. Honestly, read this section yourself, it's a very interesting (but IMO, not necessarily "productive") way to conduct business via aggressive risk-aversion. >Stigma as "Skin" used Germany as an example, but it's the dead obvious solution. If you screwed up, of course you should be less trusted in future endeavors. Especially if you were doing illegal stuff. >Money as “Skin” the more ideological solution that's more of a daydream than any real system. - CEO pays part of their net worth to the company and should earn it back via success - Salary is capped at X times the lowest paid employee - no Golden Parachute if you burn the company to the ground. >Better than that is fierce accountability. From who? Everyone you can think of. In particular, accountability that they do their jobs right, make the right choices, charge fair prices, treat employees well, treat society and the earth well, etc. honestly, getting the mass public to care about these factors feels more ideological than the "Money as skin" solution. Government regulations are about as close as we get. we're still a ways off from that, though.
- ajkjk 3y ago
  I don't think any of those are going to ever work in America. America has practically perfected "pretending like something you should feel bad about never happened". Anyway, any form of accountability that takes the form of "the person hopefully acts better" is not scalable. The only thing that is sustainable is a system by which the external world can hold the person accountable, by something approximating force: either the ability to compel them to change their behavior, evict them from the enterprise, garnish their profits, or arrest them.
  - johnnyanmac 3y ago
    >any form of accountability that takes the form of "the person hopefully acts better" is not scalable. To be fair it does scale in other societies. I think the question we should be asking isn't "why does it work there" and instead "why DOESN'T it work in the US?". Maybe it's just because the US economy has been strong for some 80 years and the individualistic culture used that position to invest in any and everything that could possibly be "the next big thing". Ideas (and clout) over anything else.
AlbertCory 3y ago
> There are countless stories of people inheriting things and ruining them because they don't have the acumen of the original creator. There absolutely are. "Shirtsleeves to shirtsleeves in three generations" is an old saying about how the kids ruin it. Can you find us some stories of NON-family companies that have lasted more than 200 years? I've looked into this, and there are a couple. But virtually all the very old companies are family-run.
- ajkjk 3y ago
  The interesting example would be "multinational conglomerates that are family-run", since obviously the dynamics of a large business are very different from those of a small one.
  - AlbertCory 3y ago
    > The interesting example would be "multinational conglomerates that are family-run" That's begging the question, literally. You're assuming something that guarantees your side of the argument. There is no reason why a company has to become a multinational conglomerate.

by ajkjk 3y ago

tstrimple 3y ago

> There are countless stories of people inheriting things and ruining them because they don't have the acumen of the original creator. Some of my most "entertaining" work experiences have been a direct result of this. In the latest example, the son of the founder went so far as to create a motorcycle dealership on the property of his completely unrelated inherited business in the parking lot of their HQ location because he was more interested in motorcycles than the business he inherited. This is a relatively small family company ($250MM/year net) that also has multiple private jets for the C-Suite of friends of the inheritor to ride around in. One of the most moral crushing experiences is when everyone sees the direction a company is taking, but we all still go through the steps we all know will be futile regardless because the money all spends the same in the end.

darth_avocado 3y ago

The problem is that in the current era, we only look at short term profits and losses, which makes it difficult to evaluate competency. The comparison of CEO vs Owner/Founder/Guy with the name on the company, should be looked from the short/long term benefits to the company. A lot of CEOs are compensated based on stock value and quarterly results, which can be gamed quite easily. You can improve profit margins if you fire half your staff, but will that ensure your company lasts a decade? Probably not. Once you take a long term view, you can align the incentives that way, and automatically ensure the CEOs have more skin in the game. E.g. instead of $3M joining bonus, move it to a bonus if you’re still a CEO after 3 years.

johnnyanmac 3y ago

>But what could give them "skin"? they bury their own lede at the end but they elaborate on it: > Shame as "Skin" Japan is (in)famous for this. Honestly, read this section yourself, it's a very interesting (but IMO, not necessarily "productive") way to conduct business via aggressive risk-aversion. >Stigma as "Skin" used Germany as an example, but it's the dead obvious solution. If you screwed up, of course you should be less trusted in future endeavors. Especially if you were doing illegal stuff. >Money as “Skin” the more ideological solution that's more of a daydream than any real system. - CEO pays part of their net worth to the company and should earn it back via success - Salary is capped at X times the lowest paid employee - no Golden Parachute if you burn the company to the ground. >Better than that is fierce accountability. From who? Everyone you can think of. In particular, accountability that they do their jobs right, make the right choices, charge fair prices, treat employees well, treat society and the earth well, etc. honestly, getting the mass public to care about these factors feels more ideological than the "Money as skin" solution. Government regulations are about as close as we get. we're still a ways off from that, though.

ajkjk 3y ago
I don't think any of those are going to ever work in America. America has practically perfected "pretending like something you should feel bad about never happened". Anyway, any form of accountability that takes the form of "the person hopefully acts better" is not scalable. The only thing that is sustainable is a system by which the external world can hold the person accountable, by something approximating force: either the ability to compel them to change their behavior, evict them from the enterprise, garnish their profits, or arrest them.
- johnnyanmac 3y ago
  >any form of accountability that takes the form of "the person hopefully acts better" is not scalable. To be fair it does scale in other societies. I think the question we should be asking isn't "why does it work there" and instead "why DOESN'T it work in the US?". Maybe it's just because the US economy has been strong for some 80 years and the individualistic culture used that position to invest in any and everything that could possibly be "the next big thing". Ideas (and clout) over anything else.

AlbertCory 3y ago

> There are countless stories of people inheriting things and ruining them because they don't have the acumen of the original creator. There absolutely are. "Shirtsleeves to shirtsleeves in three generations" is an old saying about how the kids ruin it. Can you find us some stories of NON-family companies that have lasted more than 200 years? I've looked into this, and there are a couple. But virtually all the very old companies are family-run.

ajkjk 3y ago
The interesting example would be "multinational conglomerates that are family-run", since obviously the dynamics of a large business are very different from those of a small one.
- AlbertCory 3y ago
  > The interesting example would be "multinational conglomerates that are family-run" That's begging the question, literally. You're assuming something that guarantees your side of the argument. There is no reason why a company has to become a multinational conglomerate.