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You can put any sort of artificial limit on CEO salaries. The only thing you'll never be able to touch is their true source of wealth, which is stock.

viscanti 14y ago
That's the whole point though. You want the CEO to be able to live comfortably, but you want her hungry to grow the company. Having the bulk of her assets in stock, which is worthless until the company is a success, aligns the interests of the CEO with the Investors. Startup CEOs are more savvy than ever about retaining equity. It should be clear that their path to wealth goes through building a successful company, not just waiting it out until they've used up their runway.
- alphakappa 14y ago
  If they have no money for the present, and the only possibility to make some money is to have an IPO or sale, then the CEO is not necessarily aligned to the long-term interest of the company.
  - viscanti 14y ago
    There's a big range between "no money for the present" and some salary at or below 150k a year. The point is that the CEO shouldn't be "getting rich" from their salary. They should be able to live comfortably, but not necessarily extravagantly (anything over 75k a year in SF or NYC should really suffice). If the CEO has aspirations of some day living extravagantly, she needs to have a successful exit. It sounds like you're arguing that an "under paid" CEO might push for an exit quicker and at lower value than they might otherwise, if they had a higher salary. Almost every exit is successful, and not at all a guarantee. A CEO so short sighted that they take a much smaller early exit, probably is short sighted enough to fail at running a business and will likely end up with no exit at all. As long as the CEO can pay for rent, food, family expenses and has at least 1k left over for whatever each month, that's more than enough. If a startup CEO is making a million a year, there's not as much incentive to get to a successful exit. Instead, there's more incentive to keep things going as long as possible to milk that salary. Reducing salary to a reasonable rate (I don't think anyone here is advocating ramen and a sleeping bag under the desk) and keeping incentives tied to a successful exit keeps the motivation where it needs to be.

viscanti 14y ago

That's the whole point though. You want the CEO to be able to live comfortably, but you want her hungry to grow the company. Having the bulk of her assets in stock, which is worthless until the company is a success, aligns the interests of the CEO with the Investors. Startup CEOs are more savvy than ever about retaining equity. It should be clear that their path to wealth goes through building a successful company, not just waiting it out until they've used up their runway.

alphakappa 14y ago
If they have no money for the present, and the only possibility to make some money is to have an IPO or sale, then the CEO is not necessarily aligned to the long-term interest of the company.
- viscanti 14y ago
  There's a big range between "no money for the present" and some salary at or below 150k a year. The point is that the CEO shouldn't be "getting rich" from their salary. They should be able to live comfortably, but not necessarily extravagantly (anything over 75k a year in SF or NYC should really suffice). If the CEO has aspirations of some day living extravagantly, she needs to have a successful exit. It sounds like you're arguing that an "under paid" CEO might push for an exit quicker and at lower value than they might otherwise, if they had a higher salary. Almost every exit is successful, and not at all a guarantee. A CEO so short sighted that they take a much smaller early exit, probably is short sighted enough to fail at running a business and will likely end up with no exit at all. As long as the CEO can pay for rent, food, family expenses and has at least 1k left over for whatever each month, that's more than enough. If a startup CEO is making a million a year, there's not as much incentive to get to a successful exit. Instead, there's more incentive to keep things going as long as possible to milk that salary. Reducing salary to a reasonable rate (I don't think anyone here is advocating ramen and a sleeping bag under the desk) and keeping incentives tied to a successful exit keeps the motivation where it needs to be.