5 ms·

While I agree with your sentiment, 30 years seems unreasonably long to me. At that point, you might as well just require the stock be put in a trust for the CEO

by pflats 12y ago

While I agree with your sentiment, 30 years seems unreasonably long to me. At that point, you might as well just require the stock be put in a trust for the CEO's heirs.

Arubis 12y ago
Doing exactly that would select specifically for people that care enough about future generations and those to follow to make personal sacrifices: "you won't end up filthy rich, but your children can escape the bonds of debt." Obviously not universally appealing, but I would go out of my way to work with someone like that, and would attach a level of personal trust to an organization under their guidance. I wonder what situations this would apply well to? It doesn't greatly bother me that CEOs of oil companies are profit-driven, but the concept of rewarding someone's work by enriching the people that they love, rather than just creating short-term incentives, would fit especially well with nonprofits and NGOs, which oftentimes seem like their primary mission is to justify their continued existence.
- gohrt 12y ago
  Why should the offspring of a person get the person's salary?
- tormeh 12y ago
  10 or even 5 years would be long enough. That's far longer than most CEO's stay in the job.
  - wpietri 12y ago
    That's not the correct yardstick. CEOs are supposed to be making strategic decisions with decades of impact. If they are compensated based on short-term results, then they will have a strong incentive to make short-term decisions.
    - tormeh 12y ago
      I think this is an unsolvable problem. I don't understand how anyone could accept such a delay in payment. Remember most companies aren't alive for 30 years. IBM, GE, etc. are exceptions to the rule. Maybe the best thing to do is to abandon performance-based compensation entirely, because it can't be done over long timescales and over short ones it is an abomination.
      - wpietri 12y ago
        I think you have it backwards. Perhaps the reason most companies no longer last is that the people running them have no financial interest in their long-term survival. Note that plenty of founder CEOs are happy to accept near-infinite delays in payment. 90% of Jeff Bezos's wealth is still in Amazon stock despite being there 20 years. And Amazon has been kicking the asses of its competitors for decades precisely because it has been willing to make very long-term investments.
        pflats 12y ago
        >90% of Jeff Bezos's wealth is still in Amazon stock despite being there 20 years. With Bezos, we are talking about amounts of money so large that I (and I assume you) can't truly conceive of them. If 90% of his net worth is Amazon, Jeff Bezos has ~$3 billion dollars invested in companies other than his own. He's plenty diversified and if that 3 billion is properly managed, he'll never want for anything, ever. Even if Amazon stock falls to 1/10th of its value, Bezos's life won't appreciably change, he'll just have slightly less leeway when building his multi-million-dollar cave clocks.
        wpietri 12y ago
        So? Median CEO pay in 2000-2011 was over $2m/year. That's excluding another $6m in stock and stock options. If that equity is locked up such that they get 1/30th every year for 30 years, they still won't be eating cat food. I'll note that the companies of the post-war economic boom (1946-1980) did well enough even though median CEO compensation (cash, stock, and options) was around $1m annually in real terms. So it's reasonable to think that we'll still be able to attract decent talent for the merely 2x that CEOs are getting in cash. The long-term stock would be an incentive for long-term behavior.
- adwn 12y ago
  > Doing exactly that would select specifically for people that care enough about future generations Caring about future generations on one hand, and making sure that one's own children will be very well off financially (as opposed to merely debt-free) on the other hand, are very different things. I don't think that effectively giving shares to a CEO's children incentivizes that CEO to make decisions that benefit future generations as a whole. It might, however, drive her/him towards a long-term thinking. If she/he has children, that is.
- pflats 12y ago
  >Doing exactly that would select specifically for people that care enough about future generations and those to follow to make personal sacrifices: "you won't end up filthy rich, but your children can escape the bonds of debt." You don't need CEO money to escape the bonds of debt. I went to prep school, where most of the parents were stock brokers, lawyers, doctors, or sub-C-level executives. Annual salaries in the hundreds of thousands, but not millions. Between merit scholarships (which are easier to get when you're well-off) and family money, every student there that I still talk to graduated college with little or no debt whatsoever.
Retric 12y ago
They still receive some stock on year 1 they just also get the same amount of stock on year 10 and year 30. Anyway the whole point is to get a CEO to optimize for the long term if there not willing to get deferred compensation you probably don't want them as your CEO. Sure, there are tax implications but company's can generally just pay those taxes. The point is getting upper managment to align with invested plenty of investors care about there returns over longer periods than 30 years.

by pflats 12y ago

While I agree with your sentiment, 30 years seems unreasonably long to me. At that point, you might as well just require the stock be put in a trust for the CEO's heirs.

Arubis 12y ago

Doing exactly that would select specifically for people that care enough about future generations and those to follow to make personal sacrifices: "you won't end up filthy rich, but your children can escape the bonds of debt." Obviously not universally appealing, but I would go out of my way to work with someone like that, and would attach a level of personal trust to an organization under their guidance. I wonder what situations this would apply well to? It doesn't greatly bother me that CEOs of oil companies are profit-driven, but the concept of rewarding someone's work by enriching the people that they love, rather than just creating short-term incentives, would fit especially well with nonprofits and NGOs, which oftentimes seem like their primary mission is to justify their continued existence.

gohrt 12y ago
Why should the offspring of a person get the person's salary?
tormeh 12y ago
10 or even 5 years would be long enough. That's far longer than most CEO's stay in the job.
- wpietri 12y ago
  That's not the correct yardstick. CEOs are supposed to be making strategic decisions with decades of impact. If they are compensated based on short-term results, then they will have a strong incentive to make short-term decisions.
  - tormeh 12y ago
    I think this is an unsolvable problem. I don't understand how anyone could accept such a delay in payment. Remember most companies aren't alive for 30 years. IBM, GE, etc. are exceptions to the rule. Maybe the best thing to do is to abandon performance-based compensation entirely, because it can't be done over long timescales and over short ones it is an abomination.
    - wpietri 12y ago
      I think you have it backwards. Perhaps the reason most companies no longer last is that the people running them have no financial interest in their long-term survival. Note that plenty of founder CEOs are happy to accept near-infinite delays in payment. 90% of Jeff Bezos's wealth is still in Amazon stock despite being there 20 years. And Amazon has been kicking the asses of its competitors for decades precisely because it has been willing to make very long-term investments.
      - pflats 12y ago
        >90% of Jeff Bezos's wealth is still in Amazon stock despite being there 20 years. With Bezos, we are talking about amounts of money so large that I (and I assume you) can't truly conceive of them. If 90% of his net worth is Amazon, Jeff Bezos has ~$3 billion dollars invested in companies other than his own. He's plenty diversified and if that 3 billion is properly managed, he'll never want for anything, ever. Even if Amazon stock falls to 1/10th of its value, Bezos's life won't appreciably change, he'll just have slightly less leeway when building his multi-million-dollar cave clocks.
        wpietri 12y ago
        So? Median CEO pay in 2000-2011 was over $2m/year. That's excluding another $6m in stock and stock options. If that equity is locked up such that they get 1/30th every year for 30 years, they still won't be eating cat food. I'll note that the companies of the post-war economic boom (1946-1980) did well enough even though median CEO compensation (cash, stock, and options) was around $1m annually in real terms. So it's reasonable to think that we'll still be able to attract decent talent for the merely 2x that CEOs are getting in cash. The long-term stock would be an incentive for long-term behavior.
adwn 12y ago
> Doing exactly that would select specifically for people that care enough about future generations Caring about future generations on one hand, and making sure that one's own children will be very well off financially (as opposed to merely debt-free) on the other hand, are very different things. I don't think that effectively giving shares to a CEO's children incentivizes that CEO to make decisions that benefit future generations as a whole. It might, however, drive her/him towards a long-term thinking. If she/he has children, that is.
pflats 12y ago
>Doing exactly that would select specifically for people that care enough about future generations and those to follow to make personal sacrifices: "you won't end up filthy rich, but your children can escape the bonds of debt." You don't need CEO money to escape the bonds of debt. I went to prep school, where most of the parents were stock brokers, lawyers, doctors, or sub-C-level executives. Annual salaries in the hundreds of thousands, but not millions. Between merit scholarships (which are easier to get when you're well-off) and family money, every student there that I still talk to graduated college with little or no debt whatsoever.

Retric 12y ago

They still receive some stock on year 1 they just also get the same amount of stock on year 10 and year 30. Anyway the whole point is to get a CEO to optimize for the long term if there not willing to get deferred compensation you probably don't want them as your CEO. Sure, there are tax implications but company's can generally just pay those taxes. The point is getting upper managment to align with invested plenty of investors care about there returns over longer periods than 30 years.