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No More Layoffs with a Payoff: It's Time to Freeze CEO Salaries

56 points by cratermoon 2y ago

throwaway81523 2y ago
Nobody cares about CEO salaries since their compensation is mostly stock grants and other stuff that is taxed at lower rates than wage income.
- lesuorac 2y ago
  tbh the thing that needs to get frozen is the vesting rate, stop giving CEOs contracts that encourage short term performance.
- triceratops 2y ago
  > Nobody cares about CEO salaries Pretend that "salary" means "total compensation". The article covers stock too: "freeze CEO pay and stock options and prevent stock sales for a year following any layoffs that exceed 5% of the workforce" > mostly stock grants and other stuff that is taxed at lower rates than wage income False. Income is income and it's taxed like income. Now if you were to say that companies do funny stuff like hiring a company owned by the CEO for "consulting" services in order to funnel some of the CEO's compensation there, I'd believe you. But otherwise, no. Options, grants, perks - it's all W2 income and taxed that way.
- njtransit 2y ago
  Stock grants are taxed as wage income.
  - riku_iki 2y ago
    He probably means initial grant is taxed as wage income, and then if company succeeded, stock goes up, and he pays lower long term capital gain tax.
    - njtransit 2y ago
      That would be the same if comp was paid in cash and then individually invested.
      - riku_iki 2y ago
        which somehow rarely/never happens. I suspect they may have some contractual obligations to hold on stocks, otherwise market may start panicking seeing CEO aggressively selling stocks.
- DemocracyFTW2 2y ago
  > Nobody cares about CEO salaries au contraire
nickff 2y ago
I understand that these polemics express frustration with the status quo, but isn’t it the CEO’s job to run their company as effectively (and efficiently) as possible? To that end, just as it is up to any employee to look out for their own interests when negotiating their salary, it is up to the CEO (and other managers) to look for savings where they can. Just as an employee who leaves for a higher-paying position is doing right by their family, the CEO who reduces payrolls is doing right by the shareholders.
- triceratops 2y ago
  > the CEO who reduces payrolls is doing right by the shareholders. If the company is really struggling so much, the CEO can do even more right by the shareholders by cutting their own pay. After all they're more responsible than anyone else for the company being in that situation. The article isn't arguing layoffs shouldn't happen. It's stating that they should be a shared sacrifice. If the CEO personally benefits in the short-term by laying people off their interests are in conflict with long-term shareholders' interests. So align those interests better - make it so the CEO doesn't personally benefit from layoffs. Only the other shareholders do. Specifically: "freeze CEO pay and stock options and prevent stock sales for a year following any layoffs that exceed 5% of the workforce." If they still "do right by the shareholders" when it doesn't line their own pockets, then fair enough. It was really necessary.
  - nickff 2y ago
    You’re assuming the layoffs are a reaction to poor strategy and/or decrease revenue potential, but that’s not always true. It could be that the market is shifting away from that company for some external reason, or that those employees were truly redundant.
    - triceratops 2y ago
      > It could be that the market is shifting away from that company for some external reason The CEO is the main strategy and vision guy at the company. They're supposed to be able to foresee market shifts. If they don't do that, why do they deserve to be paid so well? Because they negotiated so hard with their golf buddies on the board? It's a one-year pay cut, not the end of the world. > or that those employees were truly redundant. Maybe. In that case, the long term increase in stock price should make up for any short-term pay cuts, right? The CEO will benefit eventually too.
pkoird 2y ago
Used to be that "Captain goes down with the ship" but it's unfortunate to see the trend shift. The fundamental problem I see is that CEOs are not loyal to their "ship" and the crew. After all, why bother when you can just jump ship! I don't have any idea on what might fix this but it'll forever be a sad sight to see people and the family they feed be devalued to numbers in quaterly reports.
yalogin 2y ago
Forget about freezing pay for CEOs, they get a hike for over hiring and then subsequently taking the “bold” step of laying off people too. The revenues and stocks for each of these companies are at an all time high so the firing employees is not really justified, they are taking advantage of the mood in the industry
- riku_iki 2y ago
  > so the firing employees is not really justified they probably got lots of lower quality employees during aggressive hiring period, so make sense to cut some fat.
  - triceratops 2y ago
    C players hire C players. Start by cutting the CEO - they hired all the C players.
exabrial 2y ago
I fall into the who cares camp. The big losers are the dolt investors who dubbed the golden parachute contracts anyway. Let them lose their money, bet they won’t do it again and the problem will take care of itself.
- htk 2y ago
  Absolutely. If it's so bad let the shareholders pay the price. Market dynamics should take care of this mindset eventually (if it indeed needs fixing).
mensetmanusman 2y ago
Economies of scale lead to winner takes all. If someone can figure out how to fix that and introduce more competition, we would see very different behavior by leadership.
dgrr19 2y ago
isn't most of the payoff from stock? which means that if the CEO gets a payoff it's because he is unlocking & selling stock to the market?
- aaomidi 2y ago
  Stocks aren’t necessarily vested immediately. So that number can be reduced.

56 points by cratermoon 2y ago

Nobody cares about CEO salaries since their compensation is mostly stock grants and other stuff that is taxed at lower rates than wage income.

lesuorac 2y ago
tbh the thing that needs to get frozen is the vesting rate, stop giving CEOs contracts that encourage short term performance.
triceratops 2y ago
> Nobody cares about CEO salaries Pretend that "salary" means "total compensation". The article covers stock too: "freeze CEO pay and stock options and prevent stock sales for a year following any layoffs that exceed 5% of the workforce" > mostly stock grants and other stuff that is taxed at lower rates than wage income False. Income is income and it's taxed like income. Now if you were to say that companies do funny stuff like hiring a company owned by the CEO for "consulting" services in order to funnel some of the CEO's compensation there, I'd believe you. But otherwise, no. Options, grants, perks - it's all W2 income and taxed that way.
njtransit 2y ago
Stock grants are taxed as wage income.
- riku_iki 2y ago
  He probably means initial grant is taxed as wage income, and then if company succeeded, stock goes up, and he pays lower long term capital gain tax.
  - njtransit 2y ago
    That would be the same if comp was paid in cash and then individually invested.
    - riku_iki 2y ago
      which somehow rarely/never happens. I suspect they may have some contractual obligations to hold on stocks, otherwise market may start panicking seeing CEO aggressively selling stocks.
DemocracyFTW2 2y ago
> Nobody cares about CEO salaries au contraire

nickff 2y ago

I understand that these polemics express frustration with the status quo, but isn’t it the CEO’s job to run their company as effectively (and efficiently) as possible? To that end, just as it is up to any employee to look out for their own interests when negotiating their salary, it is up to the CEO (and other managers) to look for savings where they can. Just as an employee who leaves for a higher-paying position is doing right by their family, the CEO who reduces payrolls is doing right by the shareholders.

triceratops 2y ago
> the CEO who reduces payrolls is doing right by the shareholders. If the company is really struggling so much, the CEO can do even more right by the shareholders by cutting their own pay. After all they're more responsible than anyone else for the company being in that situation. The article isn't arguing layoffs shouldn't happen. It's stating that they should be a shared sacrifice. If the CEO personally benefits in the short-term by laying people off their interests are in conflict with long-term shareholders' interests. So align those interests better - make it so the CEO doesn't personally benefit from layoffs. Only the other shareholders do. Specifically: "freeze CEO pay and stock options and prevent stock sales for a year following any layoffs that exceed 5% of the workforce." If they still "do right by the shareholders" when it doesn't line their own pockets, then fair enough. It was really necessary.
- nickff 2y ago
  You’re assuming the layoffs are a reaction to poor strategy and/or decrease revenue potential, but that’s not always true. It could be that the market is shifting away from that company for some external reason, or that those employees were truly redundant.
  - triceratops 2y ago
    > It could be that the market is shifting away from that company for some external reason The CEO is the main strategy and vision guy at the company. They're supposed to be able to foresee market shifts. If they don't do that, why do they deserve to be paid so well? Because they negotiated so hard with their golf buddies on the board? It's a one-year pay cut, not the end of the world. > or that those employees were truly redundant. Maybe. In that case, the long term increase in stock price should make up for any short-term pay cuts, right? The CEO will benefit eventually too.

pkoird 2y ago

Used to be that "Captain goes down with the ship" but it's unfortunate to see the trend shift. The fundamental problem I see is that CEOs are not loyal to their "ship" and the crew. After all, why bother when you can just jump ship! I don't have any idea on what might fix this but it'll forever be a sad sight to see people and the family they feed be devalued to numbers in quaterly reports.

yalogin 2y ago

Forget about freezing pay for CEOs, they get a hike for over hiring and then subsequently taking the “bold” step of laying off people too. The revenues and stocks for each of these companies are at an all time high so the firing employees is not really justified, they are taking advantage of the mood in the industry

riku_iki 2y ago
> so the firing employees is not really justified they probably got lots of lower quality employees during aggressive hiring period, so make sense to cut some fat.
- triceratops 2y ago
  C players hire C players. Start by cutting the CEO - they hired all the C players.

exabrial 2y ago

I fall into the who cares camp. The big losers are the dolt investors who dubbed the golden parachute contracts anyway. Let them lose their money, bet they won’t do it again and the problem will take care of itself.

htk 2y ago
Absolutely. If it's so bad let the shareholders pay the price. Market dynamics should take care of this mindset eventually (if it indeed needs fixing).

mensetmanusman 2y ago

Economies of scale lead to winner takes all. If someone can figure out how to fix that and introduce more competition, we would see very different behavior by leadership.

dgrr19 2y ago

isn't most of the payoff from stock? which means that if the CEO gets a payoff it's because he is unlocking & selling stock to the market?

aaomidi 2y ago
Stocks aren’t necessarily vested immediately. So that number can be reduced.