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Comment by tepidandroid | Hacker News Reader

I've never understood the argument for capping CEO salaries.

It's simply how the free market works. Supply and demand. There is only a narrow pool of candidates for CEO positions that can command that kind of compensation. Why do they command that compensation? Because the potential value they bring to the company is worth far more.

Sometimes it really is that simple.

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The argument is that CEO salaries aren't actually determined by supply and demand, and that the uncertainties are so prevalent that any attempt at valuation is certainly made up. It comes down to more interpersonal networks, relationships, and power then it does analytical rigor.

At least, that's the argument.

Understood. IMO, the argument is moot though because at the end of the day, the sole determinant of valuation is what someone else is willing to pay. A highly connected CEO with many high powered relationships is valued very highly because as it turns out, those are the things needed for a corporation to succeed.

A corporation needs MUCH more than the CEO's relationship with his/her friends/connections to succeed.

When those highly connected CEOs sit on the boards of eachothers companies and determine eachother's sallaries, "what someone else is willing to pay" is not an independent variable.

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

— Adam Smith, The Wealth of Nations, 1776

Markets with unlimited freedoms are not good markets. It's why we have things like antitrust laws and why the ISP market in the US is such total shit. Supply and demand does not create equality. The argument for capping CEO salaries is that we need more equality and having it come at the expense of making markets slightly less free is pretty normal, acceptable, and morally just.

Yeah, as kerbalspacepro says, the valuations all seem random to me. The salient point in this article, to me, was that workers' quality of life and pay has only gone down with time, whereas CEO and board stakeholder quality of life and pay has only gone up. I don't think I agree with mandatory capping of CEO salaries, but I do agree with companies making $1billion+ in profit per year playing by different rules than smaller companies to close the wage gap.

> Why do they command that compensation?

Because their compensation is set by the board. What role do board members play in other corporations? CEO or directors.

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