2 ms·

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 u

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.
    - mitthrowaway2 2y ago
      Yes, I agree the overhiring was where the mistake originated (and edited my post to elaborate on 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.
  - mitthrowaway2 2y ago
    Yes, I agree the overhiring was where the mistake originated (and edited my post to elaborate on that).