It pains me to see people get frustrated by this fact.
1) Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages.
2) Companies always discuss employee compensation, especially raises and bonuses, in terms of the value an employee has relative to their peers.
So, it's no wonder that people believe that their value has something to do with their compensation: it's what they've been told by the companies themselves; it's how the most visible employees (leadership) are compensated.
No they're not. They're massively overpaid relative to value they bring. They generally get these multi-million dollar compensation packages regardless of performance. Presumably this is also because of their power to negotiate which is high because they're more or less in charge of everything.
[1] https://www.jstor.org/stable/2094020?seq=1
[2] https://www.theatlantic.com/magazine/archive/2009/06/do-ceos...
One small nuance: it can be disproportionately tied to the short term value of the company. One of the moral hazards of this compensation scheme is that it may incentivize an executive to make decisions that inflate the value of the company short term while also de-valuing it long term (when they are no longer part of the company -- presumably after they've extracted that value).
For the vast majority of leaders, their input into the company's overall performance is vanishingly small.
Take 2 people of equal skill, experience, and negotiating prowess. One lives in SF, another in Kansas City. Both apply to the same remote position for a SF-based company. The company will always take the one in KC. I don't see how negotiation skill has a role in this. Unless there are people out there who have successfully negotiated a SF-level salary while living somewhere like Kansas, but I haven't heard about it.
This just doesn't exist, not even in a hand-wavy rhetorical sense.
Are they paying 250k base in London? They weren't a few years back, and therefore they pay based on the market.
The London thing is even funnier because they claim to want top talent, but refuse to benchmark against actual top-talent companies in London (i.e. finance).
It's just nonsense, and if some of this gets disrupted by remote work then I (as someone getting screwed by the current system) will be all for it.
A real example that I've seen: two workers work for the same employer and have been given offers from other companies located in a different State. The single mother in the group had significantly less leverage because she (and presumably her employer) knew she couldn't move without potentially affecting the custody of her kids. She didn't get a raise.
Or to extend your example, someone living in KC has less leverage because they cannot use the COL argument to justify higher pay. If I'm being courted by an employer to move, you better believe I'm building COL considerations into my overall salary ask.
But in the real-world, there are lots of examples of dead-weight or people who keep their job despite having limited (or even negative) value. Sometimes this is the result of weak leaders unable to bring themselves to fire people, sometimes it's because the litigation risk is too high. On the opposite end, there are lots of examples of people who accept jobs below their cost-of-living (those living off debt, for example).
And even in non-software based products and companies industries this might be hard since the output of so many teams gets lumped together and sold as one product. What's the value of the team that creates and markets the MacBook Pro Touch bar? Personally I think it is net negative, and maybe there's even division over that within Apple.
If you are the single possible candidate for a job that is essential for the company, then you can use your monopoly power to get paid more than the “value” you bring.
If the company has an excess of candidates, they may be able to pay less than “CoL” (because CoL varies per applicant, and the minimum is someone in poverty not a standard engineer lifestyle).
I do agree with your statement as a generalisation. Although the maximum a company will pay is usually nowhere near the value you might bring (Apple average pay $150k, Apple average excess profit per employee $300k).
In that scenario your value to the company, together with all the other "essential" budget items, is the total value of the company. If you're somehow getting more than that then the company simply doesn't have the budget to pay for all the essentials and is consequently going bankrupt.