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Relative company stock performance dominates executive compensation (iirc, 80% of Alphabet CEO pay is relative outperformance of S&P500), so copying other large
by ecosystem 3y ago
Relative company stock performance dominates executive compensation (iirc, 80% of Alphabet CEO pay is relative outperformance of S&P500), so copying other large public tech companies is an outcome of the incentives.
- charlieyu1 3y agoA compensation scheme like this encourage companies to take unnecessary risk to outperform the market.
- anonylizard 3y agoIt depends, owner-CEOs have true stock, not just options, so are balanced between upside and downside risk. For-hire CEOs often are also paid in equity, not just stock options. But even with just call options (Which have no downside risk), there is the risk of the professional reputation of the CEO, if you just do middling for a few years and leave, still plenty of job opportunitiess. If you crash and burn the company down... Very tough to find another good exec position again.
- ecosystem 3y agoThat would be true if new products could make appreciable top line impact/growth during the horizon for CEO comp packages, which is typically 3 years, and if it was easier to make new revenue than slash headcount.