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Comment by andrepd | Hacker News Reader

And remember, of course, that those executives were being paid millions of dollar for their alleged "sharp business sense" and "superior decision-making" abilities. Goes to show. In my country the recipient of several international "CEO of the year" awards sunk the public telecom company in less than 2 years. And so on.

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This point can't be stressed enough, for the benefit of those who still believe we left aristocracy behind. CEO pay is bound by the rules of neither a free market nor a meritocracy (except in the original sarcastic sense of that word). Ditto for the rentiers on Wall Street or Sand Hill Road. The fact that a few peasants get to join the aristocracy every year doesn't change what it is.

It still seems very hard to shake the myth of meritocracy when wealth and connections are shown to have greater impact than latent talent, but here's some more ammunition for that argument. It's not that graduating from a prestigious school is without merit, but simply even getting the chance to do so likely means, in most cases, that one's starting conditions were more favorable. At the very least, privilege means being allowed to make mistakes and recover from them that would end someone else's aspirations.

https://www.washingtonpost.com/business/2018/10/09/its-bette...

It's a funnel. You can drop out along the way but if you're not in it from the start then it's close to impossible to enter into it.

One thing I've discovered as I've grown older is just how much the concept that business is about money is bullshit. That's a theory about business and it doesn't describe reality very well. Business is much more about power and ego than it is about money. You see this with small businesses most directly. Lots of small businesses fail because they don't do the obvious thing to maximize revenue and profits and to stay in business, instead they do things that only make sense in the context of the owner's ego and sense of power.

eh? CEO pay is bound by the same thing that everyone else pay is - the market rate. As are wall street salaries (which, again, are absolutely market based).

Now - you can argue much more effectively that CEO hiring is not very objective, that comp seems to be decoupled from long term performance, and I'll freely grant that Finance doesn't add the societal value equivalent to its slice of the pie. None of these things should be conflated with the continued existence of aristocracy

CEO pay is bound by the same thing that everyone else pay is - the market rate.

Okay, there's a market rate. Why is that rate so high? I'm sure we all thought "hell, I could have run HP into the ground for half what they paid Fiorina." Yeah, except you and I aren't in the "potential CEO" club. That club is determined by wealth, birth, and connections, not what the market will bear.

"Market rate" is not sacred. There's a ratchet effect here: the potential upside for both the CEO and the people who decide on CEO hiring is extremely large, while the downside for both parties is artificially limited by corporate structures and liability law. Worst case for them is that the CEO parachutes to another company, and the other rentiers take a slight loss quickly made up by their other bets. "Market rate" means nothing when the market is so severely distorted, and the viability of the free market itself depends on removing such distortions.

As for aristocracy, where else do you think this ratchet effect leads? It leads directly to a level of inter-generational wealth disparity that is functionally indistinguishable from explicit hereditary peerage.

Preposterous. There's no feedback from the bottom line to executive salaries. No 'market rate'.

Market rate, as in what people are willing to pay to have a CEO

Or, what the executive suite pay one another in a mutual-check-writing club

The presence of perverse incentives don't make it a non-market.

If by "people", you mean other CEOs, then yes.

I mean the people paying for CEOs, whoever they are, are the ones with a willingness to pay some amount, and that amount is the upper limit for CEO payment.

That's boards, which is other CEOs from other companies. The mutual-check-writing club.

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