It’s Never Been Easier to Be a CEO, and the Pay Keeps Rising
nytimes.com
nytimes.com
I understand that that "2.3 billion" number makes for shocking value and therefore a great headline, supporting the narrative that they're looking to construct, but the way the raw data is presented actively obfuscates readers from exploring the data and forming their own interpretations.
When I see a dataset with a 4 million percent increase YOY, I would probably classify that as an outlier, not as the representative value I report for the whole dataset.
Edit: That's not to say their narrative is wrong (that is, CEOs may absolutely be overpaid), just that the way they presented it feels misleading to me.
On a similar note, I bring thing this kind of thing up whenever people talk about how much money Jeff Bezos has.
While Bezos has a lot of cash for sure, he doesn't have $160B like news headlines make it out to be. Most of his "money" is tied up in stocks, and if he were to try to cash out all of it, it would tank the stock prices pretty hard, and he'd only get a fraction of it.
What he does have, though, is $160B worth of influence, a large part of which comes from the money tied up in stocks.
BUT that pay should be linked to the pay of everyone else in the company: the average pay or the minimum pay or whatever have you.
I think the point gets lost in the fairness. It’s fair to pay them more for their hard work. But it’s not fair to pay the CEO enormous sums while the employees struggle.
I've seen a lot of talk about hard limits online recently, I don't like it. A very high tax rate for the extremely rich I am much more OK with.
75 to 95 percent of income above 10 million seems fine. I wouldn't even tax stock holding. Let people sell 10 million in stock each year and avoid the high tax, nobody will struggle on 10 million a year. And if their money is still growing like crazy in the stock market, fine, tax it when it comes out.
Sure, nobody will struggle on 10 million a year. They won't go hungry. They won't have to worry about an unexpected car repair bill. But they will struggle to live the lifestyle that they've come to expect to be able to live. That will feel like struggling to them. And they will complain bitterly about having to struggle, and the rest of us will mock them for it, and say "You have no idea what struggling is."
Let's get rid of the 15% cap on "long term" capital gains first. A dollar earned is a dollar taxed, no matter where it comes from.
With income "caps," you no longer own a private jet, but you still fly on one.
The company hires your chauffeur, owns your vacation home, owns your private jet, hires your personal assistant, hires your other, more personal assistant, pays for your chef and maid, etc.
CEOs still live a life of luxury, but they are unable to acquire massive capital. If software engineers are labor aristocrats, CEOs become labor space emperors.
It definitely is more of an "east-coast" style of wealth, the kind of thing that shocked the "Traitorus Eight" when they were working with east coast finance to found Fairchild (if I'm remembering my history correctly.) But high marginal tax rates on the super rich were in effect at that time and they didn't understand the alternative either.
Outsourcing would skyrocket and millions of low paying jobs would be lost and sent abroad and to sub-contractors because you've just created a strong incentive for the CEO to fire the lowest-paid workers in their company.
Maybe also have a bonus structure that's add/subtract 10% to that # for jobs created/lost, so if you added 1% (USA based) increase in jobs you can get a 10% bonus, so if you earned 10 million, you can get 11 million. If your company had to lay off 1% (USA based) of workforce, then you have to take 10% less as a penalty. The idea is to encourage a healthy economy locally in America, while keeping wages up across the board.
Then there are only 2 ways for the CEO to rise above current pay: 1. raise wages. 2. hire more people. Both of which stimulate the economy.
You assemble cars. The radios are made by a company making radios in China for $1 a day.
Okay so you include those. Now miners. The metal that goes in the radio is mined by a guy for $2 a day.
This link CEO pay to worker pay thing sounds really good on paper, but I don't think you could actually do it in a way that would not encourage very bad events (like lay off half your staff)
I also tied it to % increase/decrease of employees. So if you increase by 1% your employees, you would be allowed a 10% increase bonus, so if you earn 10 mill, you now earned 11 mill if you hire 1% more staff this year over last year. However if you lay off 1% you lose 1 million because it's also a penalty. So laying off half your staff obviously does NOT help in this situation.
Because the employer cannot exist without his employees, and if the employer is getting billions while the employees are only getting thousands, then those employees are certainly getting undercharged.
It's a way to force wages to scale to productivity and value, something that (if you have not remained ignorant of the current political dialogue), has been shown again and again to not be happening anymore.
Not just that but, why should the employer make more? What added value does the CEO bring that other people cannot already do? Most CEOs can be replaced without employees, consumers, and shareholders noticing. The 'personnel value' that a CEO brings is clearly very marginal in most businesses, as opposed to bringing in more engineers or HR workers or temps. And the CEO's salary can pay for a lot more of those.
I disagree. Nobody forced anyone to be a teacher: people have chosen that job knowing full well they’d make less money than an engineer. People aren’t assigned careers like they were in a the Soviet Union: they pick what they want to do. I used to be a photojournalist. The pay sucked so I ended up doing software. Nothing is stopping a teacher from making similar choices. People complain about the pay, but they keep joining lower paid professions. It’s supply and demand.
Shouldn't everyone at least have enough for the basic necessities in life if they're willing to work (at anything not just professional jobs).
So while nobody is forcing people to work x job for shitty pay, I don't see how just because someone is famous or a CEO that warrants being paid 500x anyone else. There's a lot of shitty CEO's who definitely aren't worth 500x a software a developer, yet there they are making it regardless because the rich lookout for the rich.
Do you think it's actually okay for the person teaching your kids algebra to be making barely more money than the cashier ringing up your groceries at the store, while having to pay for supplies for their class out of their own pocket?
If a company is doing exceeding well, why should only the CEO see the benefit, and not the people doing the grunt work of actually building the products that lead to the company's success?
> Fairness and capitalism-based business generally don’t go together.
They don't, but they can.
> That kind of thinking leads to all kinds of problems. For example, is it fair for an employee to jump ship for a higher salary offer elsewhere and leave their coworkers to pick up the pieces? I would say no.
I would say yes. People jump to new jobs for a higher salary all the time.
Ideas of gbi, employee-pegged ceo pay, and universal healthcare all benefit worker mobility which will also keep corporations in check even more and 'temper' capitalism, it's not socialism --it's tempered capitalism instead of runaway crony capitalism that we'd like to see implemented.
Good point. I agree 100%, and it's so incredibly sad to see so many people defending the status quo in this thread.
There's a lot of CEO worship on HN. Probably a lot of startup founders full of themselves.
I think it's both ways, I mean there's both sides of the political spectrum on HN, you've got your progressives and Trump supporters, and everything in between. A lot of people aspire to be CEO here, and would like to know they can set their own rates and feel that someday they'll be the next Elon Musk though for 90% reading this that's highly unlikely they might make it to 1% of his success if they're super lucky.
But workers should have some sort of compensation for success of the company. If the company releases a new product and it triples the value of the company, the workers should see some sort of bonus for the value they created. Leadership is a tough job, and CEOs take on risk, but without the grunt workers the company has nothing.
To be clear, I'm not expecting equality, but the wealth gap shouldn't be as gaping as it is.
To me at least the vast majority of pay structure in traditional companies seems to be hierarchical rather than actually being structured around ‘merit’. And for many businesses I’d wager it’s really hard to actually determine individual merit over the lifetime of a business. As such a flat pay structure might be better. Particularly if there is a profit sharing scheme?
The "mass death" thing the other commenter brought up is just plain silly, IMO. Communism failed (and will always fail) due to corruption and greed, and in the past has always been implemented by malicious dictators.
The hierarchical pay structure makes some sense because the higher you go, the more risk you bring to the company. A low-level manager may make a bad hiring choice that costs the company tens of thousands in wasted wages after hiring someone unproductive. Middle management may mismanage their teams and create working environments that lower morale. Upper management and CEOs may make bad decisions on what new products to green light and can cost the company millions or tank it completely.
So, it makes sense IMO to pay the higher ups more, but there should be a profit sharing scheme of some sort to reward people of all levels for their contribution to the success of the company.
Further I can definitely see the argument that having more responsibility could be incentivised with higher pay if the risk to the individual actually increased. But I also see no compelling evidence that is actually the case. But usually in structures with flatter pay like coops individuals have more say anyway.
Corruption and greed also seem like good explanations for the status quo TBH.
If after that search you find no one willing to pay you more perhaps consider if you really are so pivotal to the companies success.
No single person will triple the value of a company. Not even the CEO. The CEO may make a major decision, but it's still the people at the very bottom doing the grunt work that implement it, and they should see some of the fruit of their labor.
I detected a note of sarcasm in your response, but I don't have sufficient context to decipher its meaning myself. Given that you were a founder for two YC companies as it says in your HN profile, could you please explain what you are implying?
I skimmed the article: it gives pretty good details on the arguments that it is trying to make. The one thing I would change would be the headline to read "It’s Never Been Easier to Be a Fortune 500 / Unicorn C.E.O., and the Pay Keeps Rising" to reflect the specific kind of CEO that the article author talks about.
Moreover, the median CEO pay in the US is $160k [0]. Perhaps there's a little confirmation bias in this article.
[0] https://www.payscale.com/research/US/Job=Chief_Executive_Off...
I assume most of us here are in favor for exchanging money for value (versus time contributed)? Correct? Otherwise, how is a $200k SW engineer’s salary justifiable compared to a $30k fast food worker’s? In the same 40 hour work week?
I do take issue with non-founding CEOs [sometimes] having no skin in the game. I saw this when I was at BlackBerry. Win or lose, the CEO that replaced the founders would win. BlackBerry lost, he didn’t. This seems like a misalignment of incentives, but that’s up to the company to address, not me, and hopefully not the government. If the company gets the incentives wrong, they lose, and hopefully we learn.
Back to the point: if a company has an impact on billions of dollars and millions of lives, I’d prefer their leader be paid well. But my preference is irrelevant here because a company can and should decide how to value that person’s role. In contrast, I certainly wouldn’t want a government policy (and it’s guaranteed slew of unintended consequences) regulating how much a chief executive is paid.
Being an effective CEO is anything but easy. And the combination of an effective CEO’s skills and experience are extraordinarily rare. It’s not a surprise that the market prices their value accordingly.
There are other paths too, like going on to lead countries.
An alternative is to 'flip' the tax. Tax companies at the rate of capital gains, and investors at their tax bracket 'normal' rate. This also leaves more capital for companies to reinvest.
[0]https://www.epi.org/publication/ceo-pay-remains-high-relativ...
I mean, I don't think "deserve" has anything to do with it. The leverage of the decisions and the market do. A company won't leave profit on the table because of the notion that one guy doesn't "deserve" to get paid some percentage of the value generated by his decisions. They'll want the best CEO possible at "any price", and market dynamics and rational self-interest will drive compensation into the hundreds of millions, with no notion of not incidentally disproportionately awarding one random person on the planet.
Once you consider other portions of the business are actually capable of generating revenue as well the original question of "how much value can the CEO actually generate" still stands.
Instead, their pay is determined based on their replacement value -- how much the company would have to pay to get another engineer of comparable skill, if the first one should leave. If it is hard to find a comparable replacement, then their pay is also determined by the absolute value increase they bring relative to a less-skilled replacement. This isn't strictly true at all times but it's the guiding principle.
A CEO can likewise make decisions with billion dollar impact. But their pay should not be determined by the value of their decision-making, but rather by the price at which others would step up to take on that role, and by how much more valuable the current CEO's decisions than those that a replacement would make.
I don't personally understand why there isn't a huge pool of skilled would-be CEOs willing to run companies for a fraction of the pay of current CEOs. Probably because CEO experience is so hard to come by. The rewards are so high though that you'd think there would be more CEO boot camps. But I guess the risk of a bad CEO (whose bad decisions could sink the whole company) are considered high enough that a real track record is considered nearly priceless, and it also has huge barriers to entry.
Why don’t we critique successful actors or athletes for their high pay? The cast of Friends made a million dollars per episode. And they didn’t even make decisions, they literally read lines and made facial expressions at appropriate moments. Certainly the editor and camera operators worked “harder.”
If the company is public, then the company has the obligation to truthfully and accurately represent itself to prospective shareholders (who can be anyone, i.e. "the public").
CEO is a very different role than athlete or actor, from responsibility to elasticity of demand for their labor and I think comparing the two is a false-dichotomy.
Edit: What you're bringing up is actually one of the cruxes of our problems here in America, management no longer owns any significant portion of the company they manage. There is almost zero incentive to behave in a way that promotes long-term success; instead, it's better to optimize for quarterly returns so you hit your bonuses and eventually move on leaving all the shit to the next person.
When ownership of a business has no power over its management, bad things happen.
If the board thought they could hire an equally competent CEO to lead the company for half the price, they would do so.