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I am confused why CEO salaries are still so high when AI can do most of their work? If companies are looking to improve margins, then decimating CEO salaries is

by nis0s 1y ago

I am confused why CEO salaries are still so high when AI can do most of their work? If companies are looking to improve margins, then decimating CEO salaries is a great place to start. I’d even say it’s a fiduciary duty to act on this sooner rather than later. No one’s networking is worth hundreds of millions. A reasonable approach is to cap CEO salaries at $2-5M, and invest everything else in the business. How is this already not being done, AI has rendered a lot of their “analysis” common place.

itake 1y ago
- CEO salaries are usually quite low as their compensation is mostly stock, not cash. - CEO salaries, even when they are high, are still a drop in the ocean compared to the company’s revenue or profits. - Elon Musk and the CEO of Starbucks have very famously been able to boost stocks just by existing…
bpodgursky 1y ago
When your observation is that the entire financial world is being irrational and you have an obvious solution, many thoughtful people would reflect upon their own priors.
- roommin 1y ago
  It isn't irrational if you frame it as people with power aligning with the choices that reward them with power.
- Arainach 1y ago
  The same financial world whose rationality has led companies[1][3] and economies[2] to ruin over and over? Rational doesn't mean sustainable or wise. [1]: https://bhc3.com/2009/05/11/when-being-rational-kills-your-business-clayton-christensen/ https://bhc3.com/2009/05/11/when-being-rational-kills-your-b... [2]: https://en.wikipedia.org/wiki/2008_financial_crisis https://en.wikipedia.org/wiki/2008_financial_crisis [3]: https://news.ycombinator.com/item?id=45745382 https://news.ycombinator.com/item?id=45745382
protocolture 1y ago
>No one’s networking is worth hundreds of millions. I was with you until here. Honestly, some networking is actually just that good. I dont believe this to be the case universally, but some people can connect people so efficiently that its mind blowing. >A reasonable approach is to cap CEO salaries at $2-5M Why is this reasonable?
- giantg2 1y ago
  "Honestly, some networking is actually just that good." Only if we include corruption. Any deal that takes special consider is arguably corrupt.
  - protocolture 1y ago
    How do you figure? Like theres plenty of information thats not public, but isnt confidential either. Accessing that information can be exceptionally lucrative. Now if that information is used to trade publicly traded shares, that can be criminal (the ethics of the situation are another matter) but if you were to instead, provide product or service on that basis, you are in fact just a well connected salesman. Not everything that doesn't go to a public tender is corruption.
    - giantg2 1y ago
      To get to the level of hundreds of millions in value over the standard process, would indicate a breech of shareholder responsibility to make the best returns instead of cutting a deal for someone you know. This can potentially undermine market integrity. Even on a smaller scale, most people disapprove of nepotism and chronyism.
      - protocolture 1y ago
        >To get to the level of hundreds of millions in value over the standard process, would indicate a breech of shareholder responsibility to make the best returns That doesn't make sense? Like if I know someone who can make your product, and you are happy with the price per unit, connecting you to that someone isnt a breech of shareholder responsibility to either party.
abeppu 1y ago
If you strongly feel that AI is doing analysis and decision-making at a level which is comparable to human executives, you and some like-minded people could try to form a PE group that takes over firms, replaces a highly compensated CEO with a lower compensation one and an OpenAI subscription, and see how you do. However, only months ago Anthropic published about their autonomous vending machine experiment which had both humorous and interesting but not financially successful. I think maybe we're not to the point where AIs can run businesses. https://www.anthropic.com/research/project-vend-1 https://www.anthropic.com/research/project-vend-1
- fennecbutt 1y ago
  Because it's impossible. CEOs are rooted in place not for skill but because of a web of social connections and class divide.
  - tracker1 1y ago
    It's entirely possible... In fact, I'm pretty sure that there are more than a few very wealthy people willing to place bets on that very thing... maybe not everything, but upwards of 1-3% of their wealth. Now, actually getting in a room and talking to those people and getting in on the execution of that idea... that's a different story.
    - fennecbutt 1y ago
      Your latter point is my point... It's technically feasible but practically infeasible because parasites won't willingly leave a host.
- shermantanktop 1y ago
  The skill ladder for humans assumes CEO functions require higher and better skills than a vending machine manager. But there's no reason to assume that AI capabilities map to those jobs in the same way. It's quite possible that an AI would do a better job at CEO than running a vending machine. And it's quite possible that successful CEOs would not succeed at managing a vending machine. It's almost guaranteed that many will fail, given that some C-level people are selected for risk appetite and social skills over actual business acumen.
semiinfinitely 1y ago
> I am confused why CEO salaries are still so high when AI can do most of their work? maybe thats why you're not a CEO
- mothballed 1y ago
  Having gotten to know several CEOs I have come to the conclusion there is no good way to identify if someone is capable of being a CEO other than having personal connections to investors.
- shermantanktop 1y ago
  Inverting that makes an interesting test of CEO potential: "if you can understand why CEO salaries are so high, you may be CEO material!"
  - roommin 1y ago
    This one is a great read because it's true whether or not you value CEOs!
  - tracker1 1y ago
    Ideally, it's similar to any commissioned sales position, just with larger numbers as it's based on the performance of the company as a whole not just one set of sales connections. The more you increase the overall value of the company, the more you get. You increase the value of the company by $10B, your commission of 1-5% is $100-500m in stock, so even your wealth is tied to the success of the company. IMO, the role of government this is to establish societal baselines in terms of criminality of certain actions and to ensure a baseline of competition. Actually acting on the former and the latter... the former by affecting the financial wealth of executives and board members when a company's neglegence harms society. The latter by not giving outsized govt contracts to a single provider for anything and to establish that if there are restrictions (medication, for example( that multiple providers/manufacturers must be present in the market, and that a certain portion is produced domestically (for security).
tester756 1y ago
But why are you caring about how much private companies pay to their CEOs?
- roommin 1y ago
  Massive wealth inequality is a societal problem.
- gambiting 1y ago
  Because in some companies the CEO compensation is a significant portion of the expenses so obviously cutting it would free up cashflow to do other things - but also on a simple human level hearing about yet another CEO getting tens or hundreds of millions in compensation while they announce how sad they are they have to let go 10% of their workforce is just simply gross. I think even in private companies you are allowed to care when this happens, and voice your displeasure with this clearly visible idiocy of the situation.
nostrademons 1y ago
The point of high CEO salaries is to align their incentives with the board and shareholders (the people paying them), so that when they are faced with the decision of losing their job vs. fucking over the tens of thousands of people working with them to increase shareholder value, they choose to fuck over the people working with them. Most people would not normally make that choice; it takes a few tens of millions in stock options before someone might contemplate it.
ergocoder 1y ago
> I’d even say it’s a fiduciary duty to act on this sooner rather than later. You said it like nobody hasn't attempted it. Many people are trying to solve this. They've replaced small mechanical works like scheduling meetings and reaching out already. The majority of CEO job is excellent judgement and motivating people. It's difficult to replace that function. A lot of CEOs are founders and owners. You can bet they want the business to run by itself, so it would free up their time to go do something else. That's the dream. You do realize that these people will earn regardless who runs the business, right? because they are significant shareholders. In a way, you wish for CEOs/founders to be much much much richer.
jedberg 1y ago
I think your complaint is about CEO comp, not CEO pay. CEOs generally don't make a ton of cash (for example the CEOs of Netflix get $3M a year, which is just a bit more than the VPs get). However, they get a bonus based on company performance and a ton of stock. CEO comp is so high because of the stock, and the fact that stock buybacks are legal. They were illegal until the 1980s. A quick fix would be to outlaw stock buy backs. The problem with buybacks is that the people who control when they happen are also the ones who benefit when they happen.
- GuinansEyebrows 1y ago
  > CEOs generally don't make a ton of cash (for example the CEOs of Netflix get $3M a year, which is just a bit more than the VPs get) this is a nit, but HEY. THREE MILLION DOLLARS is a LOT of money. like, an unconscionable amount of money in terms of annual salary.
  - jedberg 1y ago
    It is, but the point is that it's not huge compared to other people at the company. Directors at Netflix make over $1M (and some of the engineers too). In the Bay Area that's a big number, but not unfathomably huge.
gmadsen 1y ago
Two things. 1. Shareholders are entrusting the CEO with their money to turn it into more money. Networking can absolutely be worth that much. Especially at the start up stage, the CEO is selling the ability to build the money maker, which requires knowing the right people. 2. In your hypothetical, who is deciding these high level "investments" into the company? who is accountable for their strategic success or failure?

by nis0s 1y ago

itake 1y ago

- CEO salaries are usually quite low as their compensation is mostly stock, not cash. - CEO salaries, even when they are high, are still a drop in the ocean compared to the company’s revenue or profits. - Elon Musk and the CEO of Starbucks have very famously been able to boost stocks just by existing…

bpodgursky 1y ago

When your observation is that the entire financial world is being irrational and you have an obvious solution, many thoughtful people would reflect upon their own priors.

roommin 1y ago
It isn't irrational if you frame it as people with power aligning with the choices that reward them with power.
Arainach 1y ago
The same financial world whose rationality has led companies[1][3] and economies[2] to ruin over and over? Rational doesn't mean sustainable or wise. [1]: https://bhc3.com/2009/05/11/when-being-rational-kills-your-business-clayton-christensen/ https://bhc3.com/2009/05/11/when-being-rational-kills-your-b... [2]: https://en.wikipedia.org/wiki/2008_financial_crisis https://en.wikipedia.org/wiki/2008_financial_crisis [3]: https://news.ycombinator.com/item?id=45745382 https://news.ycombinator.com/item?id=45745382

protocolture 1y ago

>No one’s networking is worth hundreds of millions. I was with you until here. Honestly, some networking is actually just that good. I dont believe this to be the case universally, but some people can connect people so efficiently that its mind blowing. >A reasonable approach is to cap CEO salaries at $2-5M Why is this reasonable?

giantg2 1y ago
"Honestly, some networking is actually just that good." Only if we include corruption. Any deal that takes special consider is arguably corrupt.
- protocolture 1y ago
  How do you figure? Like theres plenty of information thats not public, but isnt confidential either. Accessing that information can be exceptionally lucrative. Now if that information is used to trade publicly traded shares, that can be criminal (the ethics of the situation are another matter) but if you were to instead, provide product or service on that basis, you are in fact just a well connected salesman. Not everything that doesn't go to a public tender is corruption.
  - giantg2 1y ago
    To get to the level of hundreds of millions in value over the standard process, would indicate a breech of shareholder responsibility to make the best returns instead of cutting a deal for someone you know. This can potentially undermine market integrity. Even on a smaller scale, most people disapprove of nepotism and chronyism.
    - protocolture 1y ago
      >To get to the level of hundreds of millions in value over the standard process, would indicate a breech of shareholder responsibility to make the best returns That doesn't make sense? Like if I know someone who can make your product, and you are happy with the price per unit, connecting you to that someone isnt a breech of shareholder responsibility to either party.

abeppu 1y ago

If you strongly feel that AI is doing analysis and decision-making at a level which is comparable to human executives, you and some like-minded people could try to form a PE group that takes over firms, replaces a highly compensated CEO with a lower compensation one and an OpenAI subscription, and see how you do. However, only months ago Anthropic published about their autonomous vending machine experiment which had both humorous and interesting but not financially successful. I think maybe we're not to the point where AIs can run businesses. https://www.anthropic.com/research/project-vend-1 https://www.anthropic.com/research/project-vend-1

fennecbutt 1y ago
Because it's impossible. CEOs are rooted in place not for skill but because of a web of social connections and class divide.
- tracker1 1y ago
  It's entirely possible... In fact, I'm pretty sure that there are more than a few very wealthy people willing to place bets on that very thing... maybe not everything, but upwards of 1-3% of their wealth. Now, actually getting in a room and talking to those people and getting in on the execution of that idea... that's a different story.
  - fennecbutt 1y ago
    Your latter point is my point... It's technically feasible but practically infeasible because parasites won't willingly leave a host.
shermantanktop 1y ago
The skill ladder for humans assumes CEO functions require higher and better skills than a vending machine manager. But there's no reason to assume that AI capabilities map to those jobs in the same way. It's quite possible that an AI would do a better job at CEO than running a vending machine. And it's quite possible that successful CEOs would not succeed at managing a vending machine. It's almost guaranteed that many will fail, given that some C-level people are selected for risk appetite and social skills over actual business acumen.

semiinfinitely 1y ago

> I am confused why CEO salaries are still so high when AI can do most of their work? maybe thats why you're not a CEO

mothballed 1y ago
Having gotten to know several CEOs I have come to the conclusion there is no good way to identify if someone is capable of being a CEO other than having personal connections to investors.
shermantanktop 1y ago
Inverting that makes an interesting test of CEO potential: "if you can understand why CEO salaries are so high, you may be CEO material!"
- roommin 1y ago
  This one is a great read because it's true whether or not you value CEOs!
- tracker1 1y ago
  Ideally, it's similar to any commissioned sales position, just with larger numbers as it's based on the performance of the company as a whole not just one set of sales connections. The more you increase the overall value of the company, the more you get. You increase the value of the company by $10B, your commission of 1-5% is $100-500m in stock, so even your wealth is tied to the success of the company. IMO, the role of government this is to establish societal baselines in terms of criminality of certain actions and to ensure a baseline of competition. Actually acting on the former and the latter... the former by affecting the financial wealth of executives and board members when a company's neglegence harms society. The latter by not giving outsized govt contracts to a single provider for anything and to establish that if there are restrictions (medication, for example( that multiple providers/manufacturers must be present in the market, and that a certain portion is produced domestically (for security).

tester756 1y ago

But why are you caring about how much private companies pay to their CEOs?

roommin 1y ago
Massive wealth inequality is a societal problem.
gambiting 1y ago
Because in some companies the CEO compensation is a significant portion of the expenses so obviously cutting it would free up cashflow to do other things - but also on a simple human level hearing about yet another CEO getting tens or hundreds of millions in compensation while they announce how sad they are they have to let go 10% of their workforce is just simply gross. I think even in private companies you are allowed to care when this happens, and voice your displeasure with this clearly visible idiocy of the situation.

nostrademons 1y ago

The point of high CEO salaries is to align their incentives with the board and shareholders (the people paying them), so that when they are faced with the decision of losing their job vs. fucking over the tens of thousands of people working with them to increase shareholder value, they choose to fuck over the people working with them. Most people would not normally make that choice; it takes a few tens of millions in stock options before someone might contemplate it.

ergocoder 1y ago

> I’d even say it’s a fiduciary duty to act on this sooner rather than later. You said it like nobody hasn't attempted it. Many people are trying to solve this. They've replaced small mechanical works like scheduling meetings and reaching out already. The majority of CEO job is excellent judgement and motivating people. It's difficult to replace that function. A lot of CEOs are founders and owners. You can bet they want the business to run by itself, so it would free up their time to go do something else. That's the dream. You do realize that these people will earn regardless who runs the business, right? because they are significant shareholders. In a way, you wish for CEOs/founders to be much much much richer.

jedberg 1y ago

I think your complaint is about CEO comp, not CEO pay. CEOs generally don't make a ton of cash (for example the CEOs of Netflix get $3M a year, which is just a bit more than the VPs get). However, they get a bonus based on company performance and a ton of stock. CEO comp is so high because of the stock, and the fact that stock buybacks are legal. They were illegal until the 1980s. A quick fix would be to outlaw stock buy backs. The problem with buybacks is that the people who control when they happen are also the ones who benefit when they happen.

GuinansEyebrows 1y ago
> CEOs generally don't make a ton of cash (for example the CEOs of Netflix get $3M a year, which is just a bit more than the VPs get) this is a nit, but HEY. THREE MILLION DOLLARS is a LOT of money. like, an unconscionable amount of money in terms of annual salary.
- jedberg 1y ago
  It is, but the point is that it's not huge compared to other people at the company. Directors at Netflix make over $1M (and some of the engineers too). In the Bay Area that's a big number, but not unfathomably huge.

gmadsen 1y ago

Two things. 1. Shareholders are entrusting the CEO with their money to turn it into more money. Networking can absolutely be worth that much. Especially at the start up stage, the CEO is selling the ability to build the money maker, which requires knowing the right people. 2. In your hypothetical, who is deciding these high level "investments" into the company? who is accountable for their strategic success or failure?