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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 po

by 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.
    - aidanlister 2y ago
      I’m a CEO, I was not given a magic ring to predict the future when I took the role, I make the best decisions I can as a totally flawed human being. Businesses have natural expansion and contraction cycles. New products are built and iterated on with a hope of finding product market fit, but most of these endeavours fail. I am paid to make the hard decisions. Sometimes that hard decision is to scale down the workforce. Yes, it sucks, but a large majority of those impacted end up financially ahead (rehired quickly and one, two or three months ahead because of the redundancy payout). Penalising a CEO for making hard decisions is a great recipe for stagnant companies. What would have happened to Kodak or Blockbuster if they had a CEO with enough grit to cut the workforce and pivot the businesses before they collapsed?
      - happymellon 2y ago
        > Penalising a CEO for making hard decisions is a great recipe for stagnant companies. What would have happened to Kodak or Blockbuster if they had a CEO with enough grit to cut the workforce and pivot the businesses before they collapsed? The situation they were both in, if the CEO had just cut staff and taken a windfall bonus then there wouldn't be the cash to pivot. Because thats what we are talking about here. It would have taken a couple of years to pivot successfully, so they should be compensated a couple of years after the layoffs not firing workers and taking their salaries as a bonus before quiting.
      - triceratops 2y ago
        > What would have happened to Kodak or Blockbuster if they had a CEO with enough grit to cut the workforce and pivot the businesses before they collapsed? The CEO would have made less money for a few years while the turnaround was in progress. If it succeeded, the stock would take off and they'd profit handsomely. I don't see the problem with these incentives. Let's remember again, the proposal from the article: "freeze CEO pay and stock options and prevent stock sales for a year following any layoffs that exceed 5% of the workforce" What you don't want is a CEO dumping the stock when it goes up after the layoff. That's a conflict of interest. And if the company needs to do layoffs to conserve cash, the CEO and rest of the leadership taking pay cuts will also help the shareholders.
- credit_guy 2y ago
  Do you know that there were times when there were elevator operators? Based on your line of argument, if a hotel really could not afford to keep the elevator operators employed, the CEO should have taken a pay cut.
  - triceratops 2y ago
    If 5% of a hotel's employees were somehow elevator operators then maybe the CEO should be fired, not just made to take a pay cut. That's poor management. And like why not? Maybe you'd see the CEO try harder to find these people alternative roles, instead of immediately discarding them the minute guests got comfortable with pushing buttons themselves. An elevator operator could retrain as a bellman, janitor or housekeeper, something in the kitchen, maybe the front desk.
    - eschaton 2y ago
      Hell, they’d probably be easier and less expensive to reassign than to hire anew for other roles because they’re already on the payroll, aware of policies, have their access provisioned, vetted for trustworthiness, etc.
      - credit_guy 2y ago
        And you think those CEO's are not aware of that? Maybe we should invite them to read hacker news. Sometimes you can reshuffle people inside a company and find jobs where they are more productive. But sometimes you can't. The OP did not care about these distinctions. If a CEO fires people, he should get a pay cut.
        eschaton 2y ago
        The behavior of many CEOs engaging in mass layoffs certainly doesn’t demonstrate that they’re aware of it. That’s why requiring massive CEO pay cuts when they engage in mass layoffs would be a good thing. It would help remind them that layoffs are a failure and the buck stops with them.
null0pointer 2y ago
I wrote a long rant in response to this but decided to spare you and instead just say this: Shareholder capitalism has fucked up the minds of so many people (especially Americans) where they think the purpose of a company is to extract maximum value for the shareholders. Sorry, no. The purpose of a company is to either a) fulfill their mission to the best of their ability (which is never “maximize shareholder value”), or b) provide quality goods/services at a fair price.
- riku_iki 2y ago
  > The purpose of a company is why do you think you have authority for such declaration?
  - null0pointer 2y ago
    I don’t need to. They tell you their purpose in their mission statement.
    - riku_iki 2y ago
      And why do you think that mission is higher priority than shareholders interests? Do they even have any legal obligations to follow that mission?
      - erik_seaberg 2y ago
        I would think they have to keep the commitments in the charter, and only the board can propose changes for shareholders to vote on (because they own it all).
  - deleted 2y ago
    [deleted]
csdreamer7 2y ago
While CEO pay may not be that material to the total revenue or total employee salaries; many shareholders (and the governments these companies seek bailouts and grants for) must ask if their poor performance even comes close to justifying their pay while tanking morale among employees with layoffs and RTO mandates to get employees to quit. Intel's and Boeing's past CEOs and arguably Google's current CEO for example did not justify their pay by any stretch of the imagination while their company's fundamentals tanked. Like many CEOs they coast on brand and monopoly effects. Google used to be seen as the AI leader for example. Intel's and Boeing's decline is becoming a national security concern for USA.
- naveen99 2y ago
  Google’s current ceo is probably on a short leash from the founders. So his failing is probably more their failing…
mitthrowaway2 2y ago
Ostensibly CEO compensation is so high in order to incentivize them to make the company perform well, this job that apparently only these rare individuals are uniquely talented to do. If the CEO suffered pay cuts or lost their job when times turned bad for the company -- the way it does for those being laid off -- then wouldn't that be a pretty strong incentive to keep the ship running well? Instead, it seems CEOs just get to keep the carrot, while the fallout from their poor decisions falls on everyone else. What kind of performance incentive is that?
- erik_seaberg 2y ago
  Lots of boards have pushed out CEOs who performed poorly enough: Apple, Disney, HP, IBM, Twitter, and Yahoo are well known. But the performance is expectations around market share, profits, stock price, or dividends, not burning as much money as possible on payroll.
  - mitthrowaway2 2y ago
    If the layoffs are announced by a new CEO being brought in to right the ship, that's totally fair. If it's the same CEO who inflated the payroll just a few years ago and is now with eyes downcast claiming "full responsibility" at the all hands when their own highly-compensated decisionmaking turned out to be a totally-unforseeable strategic mistake, then it's rather less understandable. Perhaps the CEO learned from their mistakes and is still the right leader, but their compensation structure should be forward-looking enough that if they steered the company this far wrong along the way, then their pay incentive will naturally reflect that poor outcome. But it seems that, for example, Boeing's ousted CEO has made quite the fortune despite presiding over history-making damage to shareholder interests.
    - erik_seaberg 2y ago
      In that case the mistake was the overhiring rather than the layoff. And it's hard for a board to admit that the entire plan (which they probably approved) was a mistake from the beginning. If the CEO fails at making the plan work in an obvious way, he's probably out. Edit: As I understand it, he's out if the board thinks they will recruit someone who would have done better.

by nickff 2y ago

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.
  - aidanlister 2y ago
    I’m a CEO, I was not given a magic ring to predict the future when I took the role, I make the best decisions I can as a totally flawed human being. Businesses have natural expansion and contraction cycles. New products are built and iterated on with a hope of finding product market fit, but most of these endeavours fail. I am paid to make the hard decisions. Sometimes that hard decision is to scale down the workforce. Yes, it sucks, but a large majority of those impacted end up financially ahead (rehired quickly and one, two or three months ahead because of the redundancy payout). Penalising a CEO for making hard decisions is a great recipe for stagnant companies. What would have happened to Kodak or Blockbuster if they had a CEO with enough grit to cut the workforce and pivot the businesses before they collapsed?
    - happymellon 2y ago
      > Penalising a CEO for making hard decisions is a great recipe for stagnant companies. What would have happened to Kodak or Blockbuster if they had a CEO with enough grit to cut the workforce and pivot the businesses before they collapsed? The situation they were both in, if the CEO had just cut staff and taken a windfall bonus then there wouldn't be the cash to pivot. Because thats what we are talking about here. It would have taken a couple of years to pivot successfully, so they should be compensated a couple of years after the layoffs not firing workers and taking their salaries as a bonus before quiting.
    - triceratops 2y ago
      > What would have happened to Kodak or Blockbuster if they had a CEO with enough grit to cut the workforce and pivot the businesses before they collapsed? The CEO would have made less money for a few years while the turnaround was in progress. If it succeeded, the stock would take off and they'd profit handsomely. I don't see the problem with these incentives. Let's remember again, the proposal from the article: "freeze CEO pay and stock options and prevent stock sales for a year following any layoffs that exceed 5% of the workforce" What you don't want is a CEO dumping the stock when it goes up after the layoff. That's a conflict of interest. And if the company needs to do layoffs to conserve cash, the CEO and rest of the leadership taking pay cuts will also help the shareholders.
credit_guy 2y ago
Do you know that there were times when there were elevator operators? Based on your line of argument, if a hotel really could not afford to keep the elevator operators employed, the CEO should have taken a pay cut.
- triceratops 2y ago
  If 5% of a hotel's employees were somehow elevator operators then maybe the CEO should be fired, not just made to take a pay cut. That's poor management. And like why not? Maybe you'd see the CEO try harder to find these people alternative roles, instead of immediately discarding them the minute guests got comfortable with pushing buttons themselves. An elevator operator could retrain as a bellman, janitor or housekeeper, something in the kitchen, maybe the front desk.
  - eschaton 2y ago
    Hell, they’d probably be easier and less expensive to reassign than to hire anew for other roles because they’re already on the payroll, aware of policies, have their access provisioned, vetted for trustworthiness, etc.
    - credit_guy 2y ago
      And you think those CEO's are not aware of that? Maybe we should invite them to read hacker news. Sometimes you can reshuffle people inside a company and find jobs where they are more productive. But sometimes you can't. The OP did not care about these distinctions. If a CEO fires people, he should get a pay cut.
      - eschaton 2y ago
        The behavior of many CEOs engaging in mass layoffs certainly doesn’t demonstrate that they’re aware of it. That’s why requiring massive CEO pay cuts when they engage in mass layoffs would be a good thing. It would help remind them that layoffs are a failure and the buck stops with them.

null0pointer 2y ago

I wrote a long rant in response to this but decided to spare you and instead just say this: Shareholder capitalism has fucked up the minds of so many people (especially Americans) where they think the purpose of a company is to extract maximum value for the shareholders. Sorry, no. The purpose of a company is to either a) fulfill their mission to the best of their ability (which is never “maximize shareholder value”), or b) provide quality goods/services at a fair price.

riku_iki 2y ago
> The purpose of a company is why do you think you have authority for such declaration?
- null0pointer 2y ago
  I don’t need to. They tell you their purpose in their mission statement.
  - riku_iki 2y ago
    And why do you think that mission is higher priority than shareholders interests? Do they even have any legal obligations to follow that mission?
    - erik_seaberg 2y ago
      I would think they have to keep the commitments in the charter, and only the board can propose changes for shareholders to vote on (because they own it all).
- deleted 2y ago
  [deleted]

csdreamer7 2y ago

While CEO pay may not be that material to the total revenue or total employee salaries; many shareholders (and the governments these companies seek bailouts and grants for) must ask if their poor performance even comes close to justifying their pay while tanking morale among employees with layoffs and RTO mandates to get employees to quit. Intel's and Boeing's past CEOs and arguably Google's current CEO for example did not justify their pay by any stretch of the imagination while their company's fundamentals tanked. Like many CEOs they coast on brand and monopoly effects. Google used to be seen as the AI leader for example. Intel's and Boeing's decline is becoming a national security concern for USA.

naveen99 2y ago
Google’s current ceo is probably on a short leash from the founders. So his failing is probably more their failing…

mitthrowaway2 2y ago

Ostensibly CEO compensation is so high in order to incentivize them to make the company perform well, this job that apparently only these rare individuals are uniquely talented to do. If the CEO suffered pay cuts or lost their job when times turned bad for the company -- the way it does for those being laid off -- then wouldn't that be a pretty strong incentive to keep the ship running well? Instead, it seems CEOs just get to keep the carrot, while the fallout from their poor decisions falls on everyone else. What kind of performance incentive is that?

erik_seaberg 2y ago
Lots of boards have pushed out CEOs who performed poorly enough: Apple, Disney, HP, IBM, Twitter, and Yahoo are well known. But the performance is expectations around market share, profits, stock price, or dividends, not burning as much money as possible on payroll.
- mitthrowaway2 2y ago
  If the layoffs are announced by a new CEO being brought in to right the ship, that's totally fair. If it's the same CEO who inflated the payroll just a few years ago and is now with eyes downcast claiming "full responsibility" at the all hands when their own highly-compensated decisionmaking turned out to be a totally-unforseeable strategic mistake, then it's rather less understandable. Perhaps the CEO learned from their mistakes and is still the right leader, but their compensation structure should be forward-looking enough that if they steered the company this far wrong along the way, then their pay incentive will naturally reflect that poor outcome. But it seems that, for example, Boeing's ousted CEO has made quite the fortune despite presiding over history-making damage to shareholder interests.
  - erik_seaberg 2y ago
    In that case the mistake was the overhiring rather than the layoff. And it's hard for a board to admit that the entire plan (which they probably approved) was a mistake from the beginning. If the CEO fails at making the plan work in an obvious way, he's probably out. Edit: As I understand it, he's out if the board thinks they will recruit someone who would have done better.