3 ms·

10 or even 5 years would be long enough. That's far longer than most CEO's stay in the job.

by tormeh 12y ago

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.

10 or even 5 years would be long enough. That's far longer than most CEO's stay in the job.

by tormeh 12y ago

10 or even 5 years would be long enough. That's far longer than most CEO's stay in the job.

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.