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Well, in contrast to other situations, this appears to be a zero-sum game. A company has a certain revenue, which is used to pay employees, invest back into th

• gruez 2y ago
  How do you avoid a "pay peanuts, get monkeys" problem, making the company perform worse due to incompetent leadership? Under your zero sum framing, I'm sure the shareholders would love to be able to pay the ceo less as well, because that means more profits for them.
  • jon-wood 2y ago
    Is there actually any evidence that higher pay results in better performance from CEOs? I’m sure there’s some threshold below which you’re going to get an incompetent but I strongly suspect that threshold isn’t actually tens of millions a year and a company jet.
    • bluGill 2y ago
      How much would you pay Steve Jobs vs the previous CEOs Apple had? Yes I know Jobs only took $1, but what if he demanded more - at what point would you say too much? I don't know how to value a CEO, but it is clear that a good CEO makes a big difference.
    • maxerickson 2y ago
      No. Somewhat ironically, if it was obvious what made for good CEO performance, they wouldn't be expensive.
  • trilbyglens 2y ago
    This is straw man bullshit. Were c-suite execs less competent before the 90s when executive pay regulations were repealed? Also, your argument cuts exactly into your own fingers when considering employee pay.
    • gruez 2y ago
      >This is straw man bullshit. That's not what strawman means. I mentioned an objection with paying CEOs less, but there's no implication that's the other side's argument. If that counts as strawmanning, what you're doing is arguably strawmanning as well. >Were c-suite execs less competent before the 90s when executive pay regulations were repealed? What regulations are you talking about? Also, I'm not sure how you got the impression that high pay causes good performance. Clearly paying a monkey $10M isn't going to magically make him a competent CEO. However, there are good CEOs and bad CEOs out there. Microeconomics dictates that firms will bid up their salaries, causing the more competent CEOs to be paid more. If there are regulations on executive salaries, of course that's going to lower the price, by definition. The same would apply if government capped the salaries of software engineers. That doesn't mean there wouldn't be competition between firms, it'll just get shifted to non-financial compensation eg. company cars or whatever.
  • dilawar 2y ago
    Probably the problem here is: pay gold and get Gorilla
  • malfist 2y ago
    Not agreeing with GP, but your point about paying the CEO less for more profits for the shareholders isn't always true, especially for growth companies like big tech. Their valuation is based on the future growth of the company, so while profit today matters, what matters more is increases in revenue and hitting or exceeding your guidance. Look at amazon's recent 20% tumble, it was all driven by not increasing revenue. Amazon increased it's profits just fine through cost cutting, was more profitable than ever, but missed the expected growth in revenue by half a billion dollars and it cratered.
    • bluGill 2y ago
      Ignore short term changes in stock value. What I care about is long term. Companies often do those 20% jumps (either way), but at the end of 5 years it all balances out.
    • gruez 2y ago
      "profits" isn't limited to next quarter's results. It includes future profits as well.
  • triceratops 2y ago
    There's a theory that high executive pay isn't really meant to buy competent leadership. It's to inspire the people one rung below to work harder and try to be CEO one day. Also: whatever happened to working for passion and love of the job? Or does that only apply to the lower ranks?
    • gruez 2y ago
      >Also: whatever happened to working for passion and love of the job? Or does that only apply to the lower ranks? "gotcha" arguments like these only work if you assume the other side is some sort of monolith that both believe CEO should be highly paid and that employees should be driven by passion. Both might vaguely be pro-business, but by no means does one imply the other, and therefore makes for a strawman.
      • triceratops 2y ago
        I believe one side talks out both sides of their mouth, by saying employees need to be passionate but also CEOs and other execs have to highly paid in order to motivate them. I don't think that's a strawman.
  • jacknews 2y ago
    This is the same argument that says high tax rates will deter them from working. Driven people will work hard regardless, and in leadership, the right kind of leaders will work mainly for the reputation, fulfillment from a job well done, people elevated, legacy, etc - and a respectful level of comp. The narcissists, grifters and mercenaries maybe need the $$$$$. Edit: I should clarify I mean high tax rates on the wealthy.
    • johnisgood 2y ago
      I mean yeah, they either work or they starve. Same with groceries, if you tax the crap out of them, people will still buy it out of necessity, right?
      • jacknews 2y ago
        My argument isn't that all workers should be driven. The argument is that good leaders are usually driven by things other than a huge salary, and so long as the salary isn't an insult, will do what they do. So why offer huge salaries to CEOs? It just attracts the kind of leaders that only care for the money.
        • johnisgood 2y ago
          I agree with you.
    • bluGill 2y ago
      > Driven people will work hard regardless Not everybody is driven by work. Many people are driving by the things they can get from work. The mythical rational man would eventually see that hard work isn't worth the toys anymore and so will start finding something cheaper to spend money on. You need to eat, but you can eat "beef and caviar", or "rice and beans" - at very different prices.
    • gruez 2y ago
      >Driven people will work hard regardless, and in leadership, the right kind of leaders will work mainly for the reputation, fulfillment from a job well done, people elevated, legacy, etc - and a respectful level of comp. The narcissists, grifters and mercenaries maybe need the $$$$$. They might be still CEOs even if they get paid $1, but all things being equal, they'll still go for the higher paying job. What happens if you have a competent CEO and your competitor decides to poach him? This happens all the time. Starbucks recently poached Chipotle's CEO. Given the different trajectories in stock price between chipotle and starbucks, the incoming CEO is arguably more competent. The market seems to agree[1]. If you pay your CEOs $1, it's only a matter of time before your competitor poaches him and you're left with a worse CEO. [1] https://www.economist.com/cdn-cgi/image/width=1424,quality=80,format=auto/content-assets/images/20240817_WBC728.png https://www.economist.com/cdn-cgi/image/width=1424,quality=8...
• ath3nd 2y ago
  > In 2022, CEOs were paid 344 times as much as a typical worker in contrast to 1965 when they were paid 21 times as much as a typical worker. https://www.epi.org/publication/ceo-pay-in-2022/ https://www.epi.org/publication/ceo-pay-in-2022/ I thought the almighty "invisible hand of the market" would fix this? Or maybe all those theories for trickle down economics and how capitalism helps everyone are absolute bs intended to keep people docile while they are getting exploited? Let's remove some more regulation and let's bail out some more 2-big-2-fail company, that oughta fix things /s In all fairness, it's hard to act surprised at news like this. This is the system working exactly as intended. I don't think tweaking it here and there will change things much, only a fundamental change of how we see work, government and society can enact the change we need.
  • robertlagrant 2y ago
    > I thought the almighty "invisible hand of the market" would fix this? Why did you think that?
    • harimau777 2y ago
      That's the argument given to justify hyper-capitalist policies. The money will trickle down and everyone will be better off. We are now seeing that the money often does not trickle down enough to maintain the lifestyle of previous generations and the inequality has negative effects on society (e.g. a two tier justice system, campaign finance issues, regular people being unable to compete for housing, etc.).
      • lurking15 2y ago
        > the money will trickle down and everyone will be better off that's off-base and superficial understanding of "trickle-down" economics, the idea is that the general well-being of society is based in its ability to create wealth which has a very general definition, the ability to create things that people need & therefore value and yes by pretty much any metric capitalism has raised absolutely enormous amounts of people out of crushing poverty, there's no dispute there based on the numbers housing is unaffordable due to government intervention, plain and simple, since government debased the money housing became a store of wealth
• lapcat 2y ago
  > Well, in contrast to other situations, this appears to be a zero-sum game. > A company has a certain revenue, which is used to pay employees, invest back into the business, etc. If you pay the CEO an exorbitant amount of money, it means it takes up a larger part of the income, which means you have to pay employees less, invest less, etc. This appears to be missing the crucial point of the article. The problem is not the amount the company spends on the CEO's compensation but rather the amount the company spends on financial schemes in order for the CEO to extract their compensation: "Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give every worker a $30,000 bonus, every year"
  • triceratops 2y ago
    Compensation - executive compensation and worker compensation - is a cost. Buybacks return profits to shareholders. They are not the same. There's an argument to be made that buybacks benefit bigger shareholders disproportionately. To solve that problem, tax them differently.
    • lapcat 2y ago
      > There's an argument to be made that buybacks benefit bigger shareholders disproportionately. That's not the issue. Non-founder CEOs are usually not among the biggest shareholders. The issue is a kind of conflict of interest: CEOs with stock-based compensation can directly increase their own compensation by directing the company to do stock buybacks. The CEO is the one who makes the decision about whether the company does buybacks or not.
      • triceratops 2y ago
        The board of directors authorizes buybacks and dividends, not the CEO.
        • lapcat 2y ago
• bluGill 2y ago
  This argument fails basic math. Take a company with 10,000 employees (small), If we take away 10 million from the CEOs salary (extremely large) that works out $1000 extra per employee. Nice money, not enough to make a major lifestyle improvement. To get that much per employee I had to use unreasonable numbers all around. Not that CEOs aren't being paid too much, but it won't make much difference to lower their pay.
  • rockostrich 2y ago
    > Nice money, not enough to make a major lifestyle improvement. It most certainly is enough to make a major lifestyle improvement when someone is living paycheck to paycheck. That could be the difference between just barely scraping by to being able to comfortably buy necessities and maybe even grow a savings.
    • brigadier132 2y ago
      > It most certainly is enough to make a major lifestyle improvement when someone is living paycheck to paycheck This is not what the recent universal basic income study showed.
      • rockostrich 2y ago
        > the recent universal basic income study If you're talking about the OpenResearch study that Sam Altman is funding then yes it did [1]. Granted this study was a little bit more money but the results imply that any amount of extra money helps people living paycheck to paycheck in terms of financial flexibility and safety. [1] https://www.openresearchlab.org/findings/nber-working-paper-consumption-and-household-balance-sheets https://www.openresearchlab.org/findings/nber-working-paper-...
  • stoneman24 2y ago
    Looking at the utility value for the ceo and the employees. 10M for the ceo may make much difference to his lifestyle (slightly better yacht) but the $1000 for the lowest paid could make a big difference. They just inhabit totally different financial landscapes.
• slibhb 2y ago
  It's not zero-sum because companies can grow. People love to complain about CEO compensation but does anyone doubt that having the right person in charge is important? Think about the US presidency: how much money should the US citizenry be willing to pay to get the best candidate into office? A lot!
  • kuschku 2y ago
    > Think about the US presidency: how much money should the US citizenry be willing to pay to get the best candidate into office? And yet... > §102. Compensation of the President > The President shall receive in full for his services during the term for which he shall have been elected compensation in the aggregate amount of $400,000 a year https://uscode.house.gov/view.xhtml?req=(title:3%20section:102%20edition:prelim) https://uscode.house.gov/view.xhtml?req=(title:3%20section:1... If the mightiest person on the planet can live off a $400'000 wage, CEOs can, too.
    • gruez 2y ago
      >If the mightiest person on the planet can live off a $400'000 wage, CEOs can, too. literally no one is arguing that CEOs need $50M (or whatever) compensation salaries to survive, just like software engineers don't need $500k total comp packages to survive. The argument is that companies need to pay those salaries to attract CEOs (and software engineers), otherwise your competitor will pay 10% more and poach them instead. The same arguably exists for the presidency, except "competition" is literally any other job that a competent leader could be doing, like being a CEO rather than a president.
  • velcrovan 2y ago
    There's no way to have a functional labor market for world leader positions. That probably says something about the labor market for corporate leadership positions too.
• ljm 2y ago
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