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Comment by paxys | Hacker News Reader

> As CEO, I approved and took responsibility for our ambitious staffing trajectory—this is on me

Reminder that Vlad Tenev received $800M in compensation in 2021. In the same year the company made terrible bets on crypto and banking, took an irreversible reputation hit among its core user base because of the GME fiasco, had multiple user data breaches, was subject to several investigations and was fined hundreds of millions by the SEC and other regulatory bodies, and saw its share price drop by 90%.

At this point "taking responsibility" would mean resigning and letting someone more competent fix his messes.

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Are you talking about the ~$800M in stock-based compensation described here [1]?

Nearly all of that only vests if Robinhood stock hits price targets between $120 and $300 per share. The remainder requires a price of $50.75 to be sustained for 60 days. Since none of these goals have been met, Vlad has not received any of it. And unless the company turns around dramatically - it's currently around $9/share - it's likely he never will.

[1] https://www.sec.gov/Archives/edgar/data/1783879/000178387922...

Exactly - all these articles about CEO compensation are misleading.

Case in point: Intel's CEO's 2021 salary was reported as almost $180M. In reality, he got only about $10M. He hit literally none of the targets that would allow him to get the rest of the compensation (although in theory he has a few years to hit those targets).

To be fair, if I could get paid $10M for not hitting any of my goals, I sure wouldn't complain.

To be fair, I don't think the CEO is complaining either

He doesn't even pay people to complain for him, they're so deluded they do it for free.

It’s case by case. I have seen some accurate CEO comp headlines. Some publications certainly bat better than others.

As for Intel: $10m a year is still a lot of money.

I have also heard that targets are occasionally hit. ;-D

> $10m a year is still a lot of money

In absolute terms, 100% yes it is.

In "CEO of a major corporation most people in the world have heard about," it's basically nothing.

Not scientific and maybe inaccurate, but a quick Google search showed the average Intel employee makes $100k. The shift in social norms where 100x the average employee (of a tech firm, which skews towards high salaries) is considered “basically nothing” is something worth talking about.

Intel employs 121k people.

If you're in charge of managing 121k people - 10x the average salary seems like a minimum. 100x seems in the realm of reasonable.

If the CEO's salary is distributed to all employees, they would get a ~0.05% raise. If distributed to the shareholders, it would increase profits by ~0.01%.

Yet this person's decisions can have much bigger consequences to both employees and shareholders.

> If you're in charge of managing 121k people - 10x the average salary seems like a minimum. 100x seems in the realm of reasonable.

Except, that’s not a CEO’s job. Even remotely. At best they “manage” a few department heads who each manage a few middle managers who each manage a few direct managers who then manage the workforce.

Even then, that’s a misrepresentation however. They are in charge of managing and directing overall company strategy in the interests of the board. The COO (and, sometimes, the CTO; in tech firms) is usually (indirectly) in charge of managing people.

I think it’s a valid point that they bring large value to a corporation, but it would be very difficult to quantify that value to be anywhere near 100x any other non-Csuite employee.

It's more difficult to justify to shareholders paying less, tbh.

The risks of a bad CEO are enormous.

And yet, CEOs for decades (the 50s-80s) did just fine at a fraction of wealth disparity compared to today [1]. In fact, in just the last three years; the overall disparity has increased 31% despite corporations failing to properly manage the pandemic or their workforces.

1 - https://www.forbes.com/sites/annefield/2022/05/23/ceo-worker...

> And yet, CEOs for decades (the 50s-80s) did just fine at a fraction of wealth disparity compared to today [1].

And yet, SW professionals did just fine for decades when making anywhere from a quarter to a third of today's FAANG salaries (inflation adjusted).

It’s a reasonable point. But I think the distinction is SW wasn’t creating the economic value it does now. Similar to why firmware jobs don’t pay FAANG type salaries, the scale of economic impact isn’t there. (Not to be confused with societal impact).

So the question becomes, are CEOs pay commensurate with their added value? Put differently, is the rise in production mainly attributable to the CEO (as wages were largely stagnant prior to 2020, yet CEO wages increased rather dramatically.) Are they adding more value now than they did before and, if so, can we actually measure it?

SWE (and many professional/“white color”) salaries have been stagnant for a decade and a half. In fact, the overall average has been on the decline.

Try again.

You can make your point (even a bad one, like this) without being snide.

Do you have a source supporting your comment that SWE comp in 2005 was the same as it is today?

Considering I’m the only one that has sourced anything in this thread and that the response I was responding to made an easily disproven claim in such a snide/sarcastic manner, it’s hard not to respond in kind.

But sure, from a super simple query on any search engine:

https://insights.dice.com/2018/02/09/tech-pro-jobs-pay-2018/

Feel free to gate your query to anytime between 2003ish to now, the results are all the same with a few exceptions (MLE and DeFi jobs, for instance): stagnant or decreasing.

SWE’s straight out of school made 90-100k in the late 90’s. Isn’t that what they make now?

I think the more accurate measure is the median salary. It’s not that high now and probably wasnt back then either.

I’d agree that these salaries are roughly the same if not less, adjusted for inflation, regardless of the actual number.

I was curious so I looked into it a bit.

According to BLS data [1], the median computer scientist salary in 1997 was $82k, adjusted for inflation [2]. The same data has software developers median salary today at $121k. It seems SWE are getting paid much, much better today.

Granted, the occupation titles don't align perfectly. There was no "software developer" role in the 1997 dataset, but most of the computer science positions have a median salary in the low $80k-range in todays dollars. Also note that the timeframe you chose was at the peak of a tech bubble. Probably not the best for comparison, just like you wouldn't want to use 2006 or 2021 for a gauge on housing costs.

[1] https://www.bls.gov/oes/tables.htm

[2] https://www.usinflationcalculator.com/

> SWE’s straight out of school made 90-100k in the late 90’s.

They absolutely did not with just a BS. Perhaps a few companies paid that high, but 100K would be an easy outlier.

To give you an idea, even in 2010 most non-big names outside of SV and Seattle paid under $100K right out of school. Many companies in my city were offering $70-80K. Even my big name company paid under $100K in those days.

Corporate profits are up way more than 31% in that time. So the impact to shareholders is larger.

Relevant to this thread, Robinhood numbers are way down yet the CEO still made significant salary by historical comparison. To me, that points more to a change in social norms than in productivity.

But you bring up an interesting point. The CEO may be incentivized to promote wealth disparity. If they are measured by profitability only, without regard to the larger systemic effects, it incentivizes them to take a myopic view. This could mean implementing policies that help hit short term targets without regard to long term health, suppressing wages, etc.

To a certain extent, whichever side we’re on is really just a narrative we tell ourselves since there doesn’t seem to be conclusive data about CEO impact.

The research is a bit mixed on whether a CEO of a large corporation (S&P 500 size) really matters so I’m not sure the risk statement can be said with conviction.

The thing is, they aren’t actively managing 121k people anymore than the President is commanding 1MM+ troops. Nobody is capable of actually managing that scope. In reality, they are managing a handful who are also managing a handful who are also managing a handful etc. If you disagree, ask yourself if they could intelligently describe a randomly selected employees day-to-day duties. If they can’t, they aren’t really managing them in a meaningful way.

I agree they manage the strategic vision of the company. The research on whether they make a real difference in the long term trajectory seems mixed.

Meh … just like the President … a CEO’s performance is highly correlated to business cycles and stages of a company’s growth. Most of the decisions made are not earth-shattering; they go through the motions and hire the same contractors and make the same decisions that most of their competitor company CEO’s make … after all most of them went to the same business schools and learned the same “cutting edge” business tactics from the same professors.

> is considered “basically nothing” is something worth talking about.

Except if the CEO screws up the company goes bankrupt and people lose their jobs. Look at Nokia and RIM.

Nokia and RIM got clocked by the iPhone. I don’t care who their CEO could have been, these companies were on the downward trend and headed for tough times.

> these companies were on the downward trend and headed for tough times.

Exactly why you need a good CEO at the top to understand that the landscape has changed with a new competitor but Nokia and RIM failed to adapt.

What about CEOs like Jack Welch, who everyone lauded as a paragon of management? He was handsomely paid but his decisions crippled the company years later because of bad foresight? I think the main issue ITT is that it’s very hard to measure and distinguish a good CEO from a bad one, yet they are almost all paid as if they are great leaders.

> yet they are almost all paid as if they are great leaders.

The board of directors are the ones who measure CEO performance and set compensation but most of the times they just rubber stamp whatever the CEO does.

One of the criticisms is that the boards are incestuous. Another issue may be that stock options are much more common now. I know the argument is this should align the CEOs interest with the shareholders but the counterpoint is it incentivizes a short term outlook.

> In "CEO of a major corporation most people in the world have heard about," it's basically nothing.

Perhaps CEO pay is beyond the pale generally, and these are obscene expectations.

Certainly a point worth making, and I might even be inclined to agree, but I think my point stands. Comparing against similarly noteworthy companies, Intel's CEO doesn't make all that much.

"Only $10M." Right. In a country where the median full time, year round worker makes $56k per year.

https://en.wikipedia.org/wiki/Personal_income_in_the_United_...

In more hackernewsian terms, $10 million sitting in an investment account will outearn most software developers.

Their salary has a higher salary than you.

That's a hilarious way to put it, thanks.

> Their salary has a higher salary than you.

I’m stealing this line

That speaks to another point though -- the incentive to return shareholder value, often times to the detriment to the company, the employees, the customers, and sometimes to public safety.

Well, the shareholders provided the money that allows any of it to exist at all. If there's was nothing flowing back, there'd be nothing for institutional investors. IPOs would be worthless which means there'd be no exit for VCs. Everyone would love to just get money with no obligation to give anything back, but that's not the way the world works.

The idea that companies should maximize return on shareholder value has only been around since around the late 70s. It wasn’t always like that.

Only 10M to fail to meet any benchmarks? Now that is a nice performance plan … for the CEO!

Completely valid point.

The same document points out that the CEO and CCO (both co-founders) each realized more than $168M in compensation in 2021. That's the number to talk about I think.

Wow!

$168M/(3800 employee / 100*23 layoff) = $192,219 per layed off employee

Not that I am suggesting he should pay the layed off employees from his personal kitty. Just trying to understand the numbers.

Edit: OP said CEO and COO each. So $192K x 2 ~= $384,000.

Your math makes no sense. The fewer the employees laid off, the more the dollar per employee will be. What does that mean? If a company lays off only one employee, then all of the CEO's salary could have gone to one person?

Obviously they should have laid off more employees until the CEO salary per layoff drops below $1000.

I think it just shows that the CEO earned enough to give every laid off employee a whole annual salary, so you could argue that the layoff could have been prevented for at least a year.

Exactly.

Hate to go there on HN but there _is_ a moral side to this.

What is the cost of making the kind of mistakes this guy did? And who should pay for them?

> Hate to go there on HN but there _is_ a moral side to this.

No there isn’t. Wasting money to keep employing people isn’t good for anyone. The labor market is still tight right now so the employees are better off going to a company that actually wants them.

Ok. I see your point.

And if they'd over hired, their business could still be in the same place (or worse) next year. People should just say they don't think executives should earn that much money (in good times or bad) rather than making moral justifications like this.

Sure, but no doubt a Silicon Valley programmer could take a 50% pay cut, still have plenty to live on, and double the salary of 3 cleaning staff that work at their company.

Should we talk about that too?

Nah probably not since so many people on HN are programmers.

Maybe Robinhood wants to use this money to buy the dip.

Their compensation being high is not really relevant imho. It's the hidden assumption that if only the CxO compensation was lower, those workers could've been saved (aka, instead of redundancy, the CxO takes a pay cut to pay for the wages of those workers).

Is this a valid argument? I dont know, but i feel that it isn't.

I'm trying to understand your point of view.

Are you saying executive compensation should be orthogonal to company performance?

Overpaid executives failed, so workers lost their jobs, but the executives get to keep theirs all the while saying things like "I take responsibility for this" when it is objectively false that they are taking responsibility.

Does that seem right to you? Is that a good way to run a business, to keep failed leadership?

> Overpaid executives failed

Their failure has already dropped a huge amount of their stock-based compensation. Their base salary shouldn't be determined by the company's failure (only their _future_ salary).

What if you applied this to a worker instead of a CxO? Would you yourself take a pay-cut, after the fact, if the company fails to perform?

> What if you applied this to a worker instead of a CxO? Would you yourself take a pay-cut, after the fact, if the company fails to perform?

Yes. Yes I would take the CEO's total compensation package.

I am skeptical that the CEO is worse off than any employee.

> Yes. Yes I would take the CEO's total compensation package.

As in you would accept, without knowing ahead of time, a cut to your salary when the company's performance drops?

I'm not talking about performance based bonuses or commission based pay. I'm talking about a salary that was pre-negotiated at the time of your employment, but upon the company performing badly, your salary is dropped.

This is what the OP is saying - that high CxO pay is the problem, and that they should have been paid less (after the company's performance dropped).

Employees are already paying for the failure by getting laid off. That's a 100% pay cut, the Executives who caused the fuck up still get paid.

Plenty of ordinary sales people are 100% commission based.

Plenty of CEOs already do (or did during their tenure) take no material base salary and their compensation is tied entirely to the performance of the company.

Is that not reasonable for large, profitable businesses. It has its own issues, but what compensation plan doesn’t?

> Plenty of ordinary sales people are 100% commission based.

that's not what i meant.

The question is whether you would take a pay cut _after_ the company performed poorly, but you didn't know ahead of time that it would cut your pay. Performance based bonuses or commission is obviously pre-negotiated and thus, not subject to post-fact alteration.

Executives also have to hold lots of stock that tanks when the company does poorly. Should workers also be forced to hold 100% of their RSUs as long as they work there and be paid 80% in RSUs? Even senior SWEs make 50% tops in RSUs and can sell their stock as soon as it vests with no restrictions. They get top ups to make up for poor stock performance. Their personal exposure to the company (risk!) is way lower than any executive. The CEO has effectively made negative salary due to their stock tanking.

Should companies be forced to keep unproductive or no longer useful workers? Clearly there is not enough customer demand for Robinhood to continue employing their ops/content/etc. workers. What are those workers going to do then, if they keep working?

If it’s so risky, why do CEO’s end up making 350x the typical employee? Those poor CEO’s taking all that risk to be compensated at a rate equivalent to 351 employees.

https://www.epi.org/publication/ceo-pay-in-2020/

> taking all that risk to be compensated at a rate equivalent to 351 employees

Do you understand how risk works? If you take on more risk, you should be compensated for that risk, else it doesn't make sense for you to take so much risk if you can get the same reward by taking less risk.

Executives as a whole (CEOs, VPs, even directors!) take a lot more risk - career and financial risk - than your typical line engineers. Their success depends on the success of the initiatives they lead, which can be subject to macro or competitive factors entirely outside their control. Those initiatives are generally longer timeline, meaning they have less chances at bat (and thus higher variance in outcome) than an IC. And a shitty IC can always be rehired pretty much trivially. If your company fails with you at the helm, you're not getting another CEO job. For example, Carly Fiorina has never held another management role in a large multinational corporation after her failure at HP.

On top of that, executives have to hold a large portion of their compensation as stock which they are barred from selling as long as they work at the company. If the company tanks, they take a retroactive paycut, often times upwards of 50%. They don't get refreshers to boost their comp back to original levels like ICs either.

Yeah CEOs nowadays have quite excessive compensation. But they will never have compensation at a single digit multiple of the average employee. The risk they take is too big for that to sufficiently compensate them.

The other point is that investors didn't get the desired performance out of their $168M CEO.

Journalists have no idea how corporate compensation works. At one point in Yahoo's history they reported Terry Semel's compensation as $300m. In actuality he got just his base salary that year as the options were all underwater. And they vest over 4 years. Further, they thought you multiply the stock price by the number of options to figure out how much they are worth. He would have never made that much under any circumstances.

I realize it's not something that happens, but I would say "taking responsibility" would mean taking, oh, I dunno, $50M of that $800M in compensation in 2021, and distributing it to those laid off?

(How the hell is your life different with $750M instead of $800M anyway?)

Lots of execs take "only" $100ks of compensation in salary and the rest in stock.

He's perfectly capable of giving stock to these employees as well.

It's simple to say we'd be more charitable if we had incomes 1,000x or more our current annual compensation, but I do genuinely wonder if I'd be different. Would I be greedy, would I care about doing right to the laid off employees-- it's hard to imagine how crossing that bridge might change people.

I'm not going to try to justify how I would act, or how anyone else should act, were I to have a compensation package putting me easily in the top 0.1% of society, but we can collectively dispense with the notion that certain types of compensation (i.e. stocks) must necessarily be prohibitively harder for a CEO to give up than just money.

The CEO of Robinhood would need to file a public form with the SEC if he wanted to sell any of his shares. People watch that and say "hmmm, why is the CEO of Robinhood wanting to sell shares? I wonder what he knows that we don't" and the stock goes down on that information.

Stock is absolutely more difficult to liquidate for a CEO.

Is it charitable to accept responsibility for the consequences of your mistakes, and compensate those you've harmed? Or is it just common decency?

It's probably not that simple. Most chief executives delegate the responsibility of hiring staff to others. Sure, the buck stops with the executive, but ultimately nobody can review every single operational decision at scale. Maybe they hired for a world where the pandemic didn't happen and the monetary supply didn't tighten, then the world changed.

The entire purpose of the C-suite is to stay on top of macro level stuff, and its the boards purpose to make sure the C-suite is doing it. They didn't do their job. And they got rich not doing it.

I think it's high time to see if there aren't better ways to track the macro level stuff than hiring overlords. It seems to keep not working well.

"With great power comes great responsibility"

Nah, there's not really responsibility when your parachute is golden.

Well I agree that there isn’t in practice, but I wish that there was

What CEO doesn't approve overall hiring numbers? If you're worth paying millions upon millions of dollars a year, shouldn't you have capital-F Foresight?

Or is it more that most public-company CEOs are probably not playing above replacement level?

If the CEO is ultimately responsible for nothing, why are they paid so exorbitantly?

I think by example we can guess that you might act exactly that way (since so many other people do) but IMO the important thing is how do we as a society want people to act (ITT it would not be how this person is acting).

IMO we as a society should pass rules and laws to prevent people from acting this way ie limits on compensation.

Looking at Robinhood stock, it might be way less than that now. But I get your point

Robinhood is a public company. There's no difference between getting stock/RSU compared to getting paid in cash and then using it to buy stocks.

There is if you are an executive that is privy to non-public information.

That's insider trading, and a whole different accusation than the one levied above, which is implying some sort of wealth inequality issue that executives are compensated in stocks and non-executives are compensated in cash.

My point is that if you have non-public information, you can’t actually sell the shares for cash whenever you wish, so it’s not the same thing.

>you can’t actually sell the shares for cash whenever you wish, so it’s not the same thing.

I guess it's true that you can't sell "whenever you wish", but if you set up a rule 10b5-1 plan your shares are effectively as good as cash.

Frustrating to see the incredibly common conflation of equity and salary. Even though it’s always correctly suffixed with “compensation”, people assume that means “a bank account with 8 zeros”.

That's because it effectively is. I suggest you look into pledged asset lines (and more broadly 'buy, borrow, die'), which are even more tax advantaged than just getting paid directly. Sure, there is some marginal cost associated with borrowing against granted equity, but it's almost certainly less than 10%. So yes, it is accurate to assume that if an exec vets $x00 million dollars of equity a year, they have a high percentage of that available to spend on whatever consumption or investment they desire.

Quite possibly the best comment in this thread. Some people are quick to say that the high on-paper number doesn't mean anything, but remain (in most cases wilfully) blind to the fact that the low on-paper number doesn't mean anything either. As you point out, the real number is unknown and often not fixed but for all practical purposes probably still way higher than most of us will ever experience.

Feels like you're arguing semantics, either way the CEO is being made wealthy right?

Probably still getting much more than they need to live off of, so some of that should go to the people getting let go.

It's even more bizarre/frustrating for someone, especially in tech where many of our TC is largely RSUs, not understand that wealth is almost never held in cash.

When I was young (and poor) I also believed that being rich meant having Scrooge McDuck piles of cash to swim in.

After my first big RSU payout I quickly realized that nobody with more than a few 100k in assets keeps anything close to the majority of them in cash. Savings accounts are for the poor. Anyone, even in the every day millionaire level, keeps most of their wealth in non-cash investments, leaving only enough cash to cover crisis situations. Especially with inflation this high, holding cash is literally throwing money away.

Nobody has a bank account with 8 zeros, except maybe lottery winners that never learned the basics of asset management.

Scrooge McDuck was a gold bug so he may have kept the gold to swim in just like Peter Schiff

That's a great point, even Scrooge McDuck does not hold cash!

Canonically according to Rosa the money bin is just his “personal memento” cash - the money he earned by hand and remembers every bit of. It’s only a portion of his fortune.

It does happen, though it’s a newsworthy event: https://nypost.com/2011/06/30/atm-receipt-showing-astounding...

> But it’s not clear where the customer spent his 400 bucks.

Haha, I have an idea. P.S. Dealbreaker.com is great in general for tabloidy high finance news

not putting everything in a "saving account" isn't the same as having it tied up in equity. OP was contrasting cash and equity.

Steve Jobs famously took a $1 salary and everything else was in stock.

That's not really true, at least not in the same way being discussed above. Jobs already owned millions of shares in Apple stock, so yes, he profited from the stock but AFAIK that was only from the appreciation of existing stock, not from new grants.

If nothing else, he also got unlimited personal use of the company jet.

There's a whole options backdating scandal associated with his comp, so no, it wasn't just existing stock.

Coz salary is taxed higher, many billionaires do this. He had enough control to not pay tax and just spend on the company's credit card.

The take away here is, he did get compensated. What proportions were cash salary, irrelevant.

Sure, go ahead and ask those laid off if they'd feel better if they were given a nice grant of $HOOD, which was worth about 500% more in 2021.

The post-IPO 2021 price stabilized for a while around $50, so $50M is about 1M shares. The article says about 1,000 people were laid off, so if split equally that's 1,000 shares per employee. Since then, the price has come down to about $9, so it's a severance of $9,000 today.

I would hope everyone getting laid off receives at least that much.

The rich don’t see it that way. At its core wealth accumulation is a scoring contest so every penny counts for those care.

Also if you have all the material needs that is satisfied, then you go after the rare hard to get high value exclusive money drain this is human nature.

For your specific example what that 50m might make difference it maybe a bigger jet that flies further or a second jet for the family or a yatch or a castle in Italy or penthouse in New York.

For you and me that may seem ridiculous and unnecessary, yet we do the same thing too.

There are many many parts of the world owning a car (or even riding in one) eating three meals a day or eating out are luxuries many don’t see in their lifetimes. Yet we use do all those things without second thought to people leaving on $1 a day or less .

I'd like to see what that amount of cash could could do for southern Madagascar right now.

I'd like to see what the amount you and I spend on a nice dinner out or nice shoes could do for a southern Malagasy right now.

Well, you can take a guess by observing how the vainilla price spikes affected Madagascar in recent years.

I agree with you but there is also the dynamic that there is always other richer people than you with richer lifestyles. So while you might think that one jet is enough for you if you had friends who didn't own a jet. When all your friends own 3 jets it makes you feel like you should also own 3 or whatever random expense you can imagine.

And while you say "human nature" I'd rather say it's "human illness." They someone are within a strata of society where there is no limit, a 20 minute private jet flight or a $20,000 meal is not out of the question and is in fact the norm.

They buy a fully renovated house for $10 million but then gut it to renovate it to "their tastes" and then live in it for two weeks of the year. There's just not culture to tell them it's excessive.

this is entertaining but, I think the relative-riches-rat-race theory here is missing the harsh "stick" part of carrot and stick. Money systems have both. Many wealthy people have debt and cash flow pressures, sometimes badly. The casinos and rehab clinics are full of those who lost touch with emotional stability during the race.

The sort of stable accumulation described is typical for a very small number of people overall, from low income to higher incomes, in my experience. Life is complicated.

>They buy a fully renovated house for $10 million but then gut it to renovate it to "their tastes" and then live in it for two weeks of the year. There's just not culture to tell them it's excessive.

I know of a billionaire (one of the ones most HNers consider evil) that had a lot of the local millionaires sneering at him when he didn't renovate the vacation house that he bought in the kind of place where those kinds of people buy vacation houses. According to the help at the yacht club his rational was that it wasn't worth his time to think about and there was no sense in paying someone to manage the process because from his POV there's no difference between vacationing in a house his contractor optioned out vs vacationing in one the last owner optioned out. That said, I think it may have been a "guest house" because upon Googling he has a much more extensive mansion in the area.

Imagine if I was visiting Laos and told someone I met in the countryside that I spent, say $2,000 on a racing bicycle -- which would be considered "normal" in bike racing culture in many parts of the US.

Imagine what that person would think!

My central point is this: People are quick to "normalize" their behavior relative to their perceived peer group.

So, yes, multinational CEO compensation is hard to comprehend. (It is arguably to the point where it does not serve those very corporations well. But that isn't my point...)

Just remember, the income and spending habits of a "typical" mid-range software developer in a major U.S. city are similarly incomprehensible for a wide range of people.

In some sense, it is turtles all the way down.

P.S. I'm not defending CEO pay. First, I haven't really studied it up close. I'd like to see more, erm, experimentation in it. Lowering it, sure. But also I'd like to see it deferred, for example, so a CEO's compensation is also tied to what happens after they leave. That would increase the incentive to not plunder the place or take shortcuts. Yes, I recognize this proposal seems to mix incentives between past and current CEOs. But that reflects reality. You can't just "wash off" a terrible previous CEO. And the "glean" from a wonderful predecessor will pay dividends for a long time.

P.P.S. Shameless plug: if you are a well-funded not-for-profit with a generous comp and benefits package, you could do worse than hire me. I'm an expert at studying CEO pay and pay inequity at organizations, both using intra- and inter- methodologies. I'm part of an exclusive self-selected, self-reinforcing group of self-proclaimed experts, so be sure to send your best offer.

There was a podcast episode on the psychology behind this. Radio Lab? Summary: people only look up, never down.

Ask someone who makes $100, and they'll explain they don't have a lot because someone makes $500.

Ask someone who makes $100,000, and they'll explain they don't have a lot because someone makes $500,000.

Ask someone who makes $100,000,000, and they'll explain they don't have a lot because someone makes $500,000,000.

Is this an offer of employment? It doesn't look like an offer of employment. \s

> I'm part of an exclusive self-selected, self-reinforcing group of self-proclaimed experts, so be sure to send your best offer.

Not a job offer and no offense intended, but you sound like an excellent crypto startup founder there. Oh wait, they wouldn’t have used the term self and instead used a much more grandiose term. :P

At my company (non-tech), all leadership compensation is paid based on percentages hit over the next five years.

Your first year, you’re only getting 20% off the position’s salary, and 80% goes to your predecessors. When you retire, 20% of your salary got the previous four years is based on how well the company does the year after you leave.

It strongly incentivizes healthy transitions and long-term plans.

What type of company is this if you don’t mind sharing?

The study of reinforcement learning, I've found, is incredibly insightful as a way to really force us to operationalize reward functions. I've benefitted from the process of reasoning and exploring RL reward functions.

Sure, I also value game theory, sociology, and psychology as well. People are complex, with culture, identities, imperfect reasoning, and biochemical influences.

That said, one key benefit of RL is the hands-on experimental aspect. You get to play God and see what happens. Surprise triggers cognitive dissonance and drives further questions. In contrast, some academic disciplines become rather enamored with their own theories, to the detriment of operationalizing them.

Imagine everyone is on a ladder. In order to ascend they have to step on the faces of the people below them while simultaneously getting their face stepped on by the people above them. Which one do they care more about?

Another way to think about it: Who has various kinds of power? To set pay? To help get one promoted? To help the company succeed?

Treating people well tends to have good long-term results. There are exceptions, situations, and cases where you have to be more cautious. To put it nicely, there are some people who favor shorter-term strategies. We all should recognize there is a fraction of people lacking in awareness or empathy or ethics. Some of the folks, wittingly or unwittingly, will bring down the entire ship if you let them. Still, IMO, a wise, ethical person gives the benefit of the doubt and helps others to the extent possible, without overextending themselves. As time passes, a good strategy is to help relatively more people who (a) need the help; (b) reciprocate, to the degree they are able; (c) and let's face it, those who can help you get a foothold. The third point is based on this logic: if you are a conscientious person, it is your ethical responsibility to not be naive. You should carefully strive to use your power to help. Sometimes this means playing the game.

What I've said above leaves open all sorts of paradoxes, value judgments, and dilemmas. Such is life. I think it is useful to frame ethics as striving towards an ideal (not just a goal) despite all the complexities. I could use all the feedback you all have to offer... I have a long way to go.

I don't entirely disagree with your point. However you and that person in Laos both have to work to put a roof over your head and food in your plate.

There's an absolute threshold at a few million dollars that guarantees financial independence wherever you are in the world. These rich people are well above that threshold. That's why it is more ridiculous to chase ever more money at their level than it is for you to purchase an expensive bike.

Indeed.

I see plenty of people on HN complain that no, they are not middle class while making $400,000/yr because they can't afford a 2,000 sq ft house in the most expensive area of the US.

Like the old saying "An alcoholic is someone who has one more drink than me."

It's the difference between having only one or even no helipad on your floating gin palace or two.

The article said it was around 1000 employees. So cutting his pay by $50m would mean $50k per laid-off employee.

How as an investor or shareholder can you not look at this as downright robbery?

But the same $50m paid to a single employee (on top of hundreds more) is not robbery?

I might have been too obtuse with my post. I meant that it's robbery for the CEO to be compensated so much.

That would be his money, not the shareholders

But how would that motivate the other CEOs or aspiring CEOs to be better CEOs? /s

With $800M you can’t keep up with the really successful billionaires. You know, things like sports teams, bezos’s yacht etc.

What do you mean "how is your life different"? His yacht may not have a second helicopter pad, for example!

Thing is, though, you really do need that second helicopter pad. That way, when yours is parked up there, you can still receive visitors. It’s not easy being rich.

100% this

Or he may have to settle with a medium-sized jacuzzi.

https://www.youtube.com/watch?v=frh5lA5uGRU

>I realize it's not something that happens

It definitely happens in some cultures. I remember reading about the CEO of Nintendo taking a temporary pay cut after the botched launch of the Wii U. At the time, people were talking about other Japanese CEOs that had done this too.

For one thing, as another comment mentioned, he didn’t actually get $800M because that was contingent on hitting various price targets that didn’t happen.

For another, it’s not like it’s just cash sitting in a checking account. It would be stock in the company. Since he’s a CEO, he can’t just sell it whenever he wants, insider trader rules mean there’s only certain windows when he could buy or sell, and the CEO selling off that much of his holding would raise all sorts of questions among investors.

If he did it as a personal gift to each employee, there’d be enormous gift taxes that would eat most of it.

If he did it as part of their compensation, it would be coming from the company, not him, and he would have to justify to the board of directors and shareholders why he’s spending so much on a lavish severance package that is far beyond the industry norm (assuming they aren’t already getting generous severance packages)

It’s not as simple as “Oh rich people could just fix every problem by giving away all their money, but they’re just greedy jerks”

To counter that a bit, rich people with these kinds of assets can take out loans or cash with their assets as collateral. And of course these loans have way better rates than whatever kinds of loans you and me could get. Even better - This way, they don't even have to pay capital gains tax.

What I'm saying is, Vlad could most likely buy an expensive yacht without ever having to actually sell stock, so the argument that "it’s not like it’s just cash sitting in a checking account" is not that fair as well. Makes it seem like the uber-rich are actually quite restricted and that all of their money is locked up in investments and other things. Which is simply not true, they can use these locked-up assets in very attractive ways.

See this article for a better write-up: https://www.businessinsider.com/securities-asset-backed-loan...

Loans still have to be paid back at some point. It’s true that sometimes banks are happy to let the billionaires have the loans for their whole lives and get paid back out of their estate when they die. But, when you borrow against a security (like a stock) and the value of that security plummets (like pretty much every tech stock did recently) the terms of your loan can force you to sell the stock and pay it off right away. (and sell it at the worst possible time since it just crashed and now you’re locking in that loss) So it’s not really a good idea to over leverage yourself in that way.

Sure, he can borrow a bunch of money against his stock and buy a giant a yacht or give it away to people who got laid off, just like a normal person can borrow a year’s worth of salary from credit cards or take out a high interest loan to buy an expensive car, but that doesn’t mean it’s a good idea.

> Reminder that Vlad Tenev received $800M in compensation in 2021

No he did not in fact receive $800m. You seem to know a lot about the performance of RH stock, but you’ve completely missed the fact that the poor performance means he won’t be seeing that $800m worth of stock - almost none in fact.

He got a comp plan that could get him up to that much in stock if certain goals were met, but none of those have been met so he hasn’t gotten any of that $$.

Suffice it to say, if he had met those goals, they wouldn’t be laying off anyone, as their stock price would be sky high.

> laying off anyone

Laying off 23% of staff is _literally_ how he will make the stock go up enough to get a good % of his compensation, if not 100%.

Robinhood's executive compensation clawback policy just FYI:

In March 2021, our board of directors adopted a clawback policy effective upon the closing of this offering. Under our clawback policy, our board of directors may recover incentive compensation from an executive officer in the event of (i) a restatement of our financial statements or a material error in the calculation of one or more performance-based measures used to determine the amount of such compensation or (ii) the executive officer’s “detrimental conduct” (as defined in our clawback policy) that results in an excess performance payout, results in legal proceedings or causes us material financial or reputational harm

ref. https://www.sec.gov/Archives/edgar/data/1783879/000162828021...

I'm wondering how much of that language is common to all publicly traded companies and how often the clawback policy is actually activated. Maybe the board sees enforcing the clause to be detrimental because it would impair their ability to hire another CEO, or it would have a chilling effect on the performance of CEOs in general. The board members are all wealthy themselves so this isn't a decision that affects their lives in any material way, except for their likelihood of being appointed to other company boards in the future. They basically meet in a fancy conference room once every six weeks to eat an expensive lunch and play-act at running a company.

The Shopify layoff also contained this phrasing. Shows how tone-deaf these CEOs are.

Shopify's version:

> Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today.

I commented about this when it happened and was met with vitriol. Nice to see people here have some sense.

This is basically the Lord Farquaad line: "some of you may die, but it is a price I am willing to pay"

I don't think they're tone-deaf as much as they don't care. Which reminds me of another line, this time from Kids in the Hall (from the Girl Drink Drunk sketch): (from memory, so may not be exact) "I can't help to feel responsible for this, but then again, I can't help not to care: that's just who I am")

Note that the complete, non-truncated quote [1] says:

"Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that."

Emphasis added, but perhaps some part of this apparent tone-deafness might be attributed to the omission?

[1] https://news.shopify.com/changes-to-shopifys-team

I question "we have to say goodbye"

I worked for a small business. The CEO and other executives were generally ethical people. When revenue went down, the C-level executives took a pay cut to ensure others could stay. They knew they could weather it better than their employees. Their salaries were always some of the lowest even before that, because they had a stake in the business that the employees did not have.

Given how much money this person makes, how much of a safety net they likely have compared to their employees, it doesn't make much sense that they do not redistribute their personal wealth to help the people they are "deeply sorry" to "say goodbye to"

An article I read on HN talked about the difference between being nice (saying something to appease someone) vs. kind (doing something that benefits another person).

It mentioned on the NYC Subway you will see a guy help with a mother's pram but not say a word. No small talk. No smile. They are kind but not nice.

Assuming the above definition, I would say this CEO is "nice" but not "kind".

Since when did giving millions to some bankers being laid off become the signal of being kind?

They are getting severance packages with two months of further employment, and while that is not ideal for them at the individual level, I don't see why they need charity any more than anyone else.

Being kind would actually be donating the money for truly charitable purposes to help the poorest.

I agree. Being kind is not keeping it for yourself.

Also the "some bankers" classification. I remember in the 2008 crash people getting angry at their tellers because they are "bankers". Yes they are, but they probably don't earn that much, dude.

>For Tenev to actually receive the full compensation, Robinhood stock would need to trade up to $300 per share over the next seven years, the company said in the filing.

It closed today at $9.23, so it's a fair guess that he's not getting anywhere near 800M value.

His job is to make big ambitious bets. These didn't pay off. CEOs are not hired (or retained) for the benefit of employees or customers, they are hired by boards for the benefit of shareholders, and shareholders in Robinhood were not buying for stable reliable dividends.

Shareholders have a residual interest.

Debts, taxes, regulations, suppliers, and other liabilities and requirements come first.

The CEOs making ambitious bets should take those into account.

If you crash a company against the wall resulting in such a disaster and having to cut so much staff, resigning isn't enough. CEO's should have to pay back big parts of their compensation.

executives should be compensated for the performance of the company in the future, not the current quarter or year. this is the board's fault for failing to set effective incentives.

Did the board members pay the CEO with their own money? Or some bag holders?

Will the board return their board fees?

Isn't that what a vesting period is supposed to enforce?

yeah it needs to be stretched more.

people talk about ESG... imagine what the world would look like if energy company executives were compensated based on the health of the company (and by proxy the health of the economy) ten years in the future...

also maybe more tax rules along the lines of long/short cap gains that reduce the short term time value of money.

>people talk about ESG

What you described is supposed to be part of the "G" in "ESG".

Exactly, there should be a multi-year lockout period where the CEOs cannot sell their stock. If the potential hires don't like it, well, cry me a river. Plenty of people would still take the job, especially if they are interested in building a long-term company.

If the CEO picks the board, and packs it full of his other CEO friends, who all have him sit on their boards too, and everyone rubber stamps each others compensation packages; isn't this circular blame game awfully beneficial to all of the CEOs at the expense of all the non-CEOs?

The way you know that would never happen is that he said he "takes responsibility".

I'm serious. If there were any risk at all that he might lose a cent, he would never admit anything in a way that could be referenced by a lawyer.

Do you want it to be very hard to fire people? If you make it that way, then companies become much more reluctant to hire people, and tend to start hiring on contracts instead of full time. My understanding is that that's been the effect in France, at least. And if you think about it, it's a completely rational response to essentially making it riskier to hire.

I'm talking about CEO's, CTO's, CFO's and the like. People whose decisions have an overwhelming impact on the company. Not Rob from accounting.

Vlad Tenev received $800m for taking the company public per an RSU agreement the board gave him in 2019 and $800m was when the stock price was $50+. Nows its only worth $130m. Banking is standard with discount brokers, you have a sweep account that is probably on an FDIC insured bank. GME issue was a lack of capital to settle GME trades. They owed $3 billion to NSCC. Robinhood was insolvent but people always flock to conspiracy theories on why Robinhood pulled GME trades. I am curious what would be the better decision for robinhood with the GME issue?

I don't use Robinhood but do benefit that my trades at other discount brokers are now free.

Didn't etrade and/or other frims do the same halting of GME because they couldn't cover the overnight options capital requirements?

Ultimately RH and others didn't have the ability to raise the crazy amount of capital they needed to cover trades over a very short time and instead of breaking these requirements and receiving the consequences (getting taken over by SIPC? or whatever, I don't actually know) they halted trading.

Failure to predict an unprecedented future, I suppose.

I read this as saying "This is not happening because you did a bad job, it's because I did a bad job".

An important thing to mention at a layoff.

That's what a layoff is. Otherwise it's a firing for cause

Taking responsibility would mean returning a significant portion of that compensation.

Wait, shouldn't this be returned back to whom the money belonged (investors)?

Investment comes with risk - that's why you can make money at it. I think it's fair to say if this business is struggling it'd be more equitable to share the excess compensation with rank and file employees that are being deprived of their livelihood but unfortunately they likely have no "right" to that compensation with how various employee contracts are structured. It's usually the case in situations like this that the CEO getting a golden parachute is less expensive to the company than trying to get out of paying them. Companies, of course, would prefer a world in which no one had to be paid so all this thread is sort of a socialist pipedream where the havenots might actually get treated fairly since if the money wasn't going to the CEO it'd likely end up straight back in the pockets of investors.

All these people had salaries in excess of $180k I presume + stock compensation. Sorry, but they do not fall in the category of people that were exploited.

I firmly believe in at will employment.

In this case, the CEO exploited the investors, whether it is VC firms, institutional or private investors by making an error in the judgement of hiring needs. Of course there is a risk in investment, but when CEO's make major mistakes while paying themselves $800M in compensation; investors should seek relief.

> All these people had salaries in excess of $180k I presume + stock compensation. Sorry, but they do not fall in the category of people that were exploited.

The gilded cage is freedom argument?

I am making the argument that they were not in a cage at all and that they were justly compensated for the risk of joining a rapidly expanding startup.

Investment is always a gamble. Employment shouldn't be.

At least back to the company; extend that runway and maybe prevent some layoffs.

Reminder that Vlad Tenev founded Robinhood, an incredibly successful app that disrupted an industry and is still best in class. There really is no replacement for a founder CEO.

Would you say the same about Travis Kalanick or Adam Neumann?

And Elizabeth Holmes

Not the best example since she wasn't replaced.

I would say that Kalanick and Neumann's mistakes were quite a bit worse than overhiring.

Sure, what I meant is that founder CEOs are not as irreplaceable as it might seem.

To be fair, Travis was not the founding CEO of Uber. That was Ryan Graves.

Not true that there's no replacement for a founder CEO. Creating a company and growing it to viability is a much different skillset than running a company of a given size. Many startups have actually eventually suffered because they didn't transition.

Brokerage is such a competitive space, their valuation never made any sense. And big money players would never use Robinhood over Schwab et all

> And big money players would never use Robinhood over schwab et all

Their entire business model is PFOF [0]. That is, a huge fucking scam against retail.

[0] https://www.investopedia.com/terms/p/paymentoforderflow.asp

Why would a typical retail investor prefer commissions to PFOF? Seems like a much better deal.

>Why would a typical retail investor prefer commissions to PFOF?

It's about incentives. I am more than happy to pay $0.65 to Fidelity for my options trades, because I know that Fidelity's incentive is to get me the best possible price. Commission fees are absolutely negligible compared to price improvement with a real broker.

I don't remember exactly but i thought Robinhood was first about how it had "free" trades and then they basically forced all their competitors to race to the bottom and lower fees in response. For some retail traders it was like pay $10 to get a few shares of some stock you want to buy. Pretty terrible deal in comparison to PFOF.

You don't sound like a typical investor so I get why you might care deeply about pennies at price execution. But I think most retail investors really don't care about PFOF and prefer it to commissions. And some of these retail firms are basically about just getting your stock trading business so they can funnel you towards professional portfolio managers who will just take a cut of your savings for no real value...that is probably even worse than the PFOF business model imo.

Basically, the beta version of the Fidelity app very nearly defeats the purpose of using a brokerage like Robinhood.

“We will be like [established legacy business] but our app will be better” is not a long term business model.

"With big money comes big responsibility, so I took that responsibility and I'm going to take more of it next year. As a result of my increased responsibility, 25% of our staff will be given new opportunities this year and 25% more will see even more opportunities next year. Stay tuned."

When I was a young boy in Bulgaria people would be laid off left and right and nobody complained.

I hate this BS lately with CEOs claiming it's "on them" and "their bad decisions" as if that somehow makes it all okay. There is NEVER any repercussions for CEOs when they fire/lay off no matter how many people.

So if it's on you, how about YOU lose your job?

No?

Oh well then.

i’m positive vlad feels like he did something hard by “taking responsibility.” but he loses nothing and some former employees are now in a precarious financial situation. his skin in the game is nothing compared to theirs.

At this point, unfortunately, "take responsibility" it just a PR phrase. It doesn't come with any consequences, responsibility, or costs to the individual in the corporate class.

At first I was like "jesus christ this is going to be a bloodbath" and then I read your post and thought "huh yeah i guess it makes sense they are firing people."

The beauty of corporatism - unlimited upside and no downside.

How much of that compensation was in Robinhood stock, which dropped 90%? How much of it vested?

These aren't rhetorical questions, I'd like to actually know these details.

> At this point "taking responsibility" would mean resigning and letting someone more competent fix his messes.

Your derision is probably blinding you from the solution that's most likely to produce the best outcome -- him learning from his mistakes & cleaning up his own mess. Resigning won't be a magical fix-all.

It's actually ironic that your definition of "taking responsibility" is him quitting and having someone else clean up his mess. Paying back a portion of his stock based compensation from 2021 or forfeiting his comp going forward would make sense though.

Yep, talk is cheap. Of course he's responsible, whether he admits it or not.

If not willing to step down, then give up pay.

Good lord, if I resigned every time I caused a production issue my resume length would triple.

You are allowed to admit you made a mistake without publicly self flagellating. This is some straight puritanical shit.

Does your company also do mass layoffs whenever you cause a production issue?

The impact doesn’t matter, the magnitude of the mistake does.

* If I take all reasonable precautions and bad thing still happens — not a fuckup.

* If try my best but make an honest mistake like being forgetful — minor fuckup.

* If I try my best but don’t know something crucial — minor fuckup. If I am paid to be an expert on that thing — major fuckup.

* If I deliberately choose to forego necessary precautions because that’s effort it’ll be fine — major fuckup or legal trouble depending on the field.

* If I purposely cause bad thing to happen — legal trouble.

* If I choose to take a calculated risk in good faith after getting the advice of my board and my advisors and bad thing happens — not even a fuckup.

How bad the bad thing is doesn’t matter except at the margins “no harm done” or actual injury. Downsizing a company does not meet that bar.

Being in a leadership position shouldn’t be a job of calling coins in the air and betting your job you get it right.

“crypto up plz” being the calculated, good faith, board approved risk?

I’m not saying it was illegal. All I’m saying is the people who paid for the bad bets (with their livelihoods) were not the same ones who made the bets in the first place.

Not my company not my bets. I’m paid to staff a post at a company, the CEO laying people off has no more impact on or responsibility to my livelihood than I do to the workers of food truck I frequent. As a worker I take literally no risk except “one day they might stop paying me.” I am not impacted at all by how the company is doing.

And if you’re a stock holder then you should love this move since it’s in your best interest.

Comparing you frequenting a food truck to a CEO that takes massive risks at the expense of his employees is insane.

> at the expense of his employees

This was the whole point of the analogy. Taking risky bets has cost the employees nothing. The only thing that the employees have lost is imaginary future pay and benefits that could have been taken from them at any point for near any reason. It's hurting the employees that were laid off as much as me choosing not to eat at my local burger stand hurts its owner. Dgmr, it sucks to get laid off, it's a huge PITA and a good number of them were probably depending on that income but they haven't lost anything.

Those cost of those massive risks are actually literally at the expense of the shareholders. Ironically the employees who have some of their compensation in stocks will actually be helped by this move.

He's personally lost hundreds of millions of dollars in equity value from this production issue. So I'd say he's "given up some pay".

How many lives were impacted significantly by your production error?

It is worth repeating this.

800M is more money in a single day than a very large number of people make in an entire lifetime.

Wat?

What does the timescale of a single day have to do with anything?

And giving a million bux to every one of the saps that got laid off. He's a crook.

> ... took an irreversible reputation hit among its core user base because of the GME fiasco

God I'm so sick of hearing this. It comes from people who seriously don't know what happened.

let me explain: RH had (and still has) a service that you can trade immediately on signing up and sending funds rather than waiting for them to clear. This mostly works out fine because people buy different things and you have the underlying assets as security so it tends to work out, meaning it's not a risk of a huge loss. Put another way: the convenience of RH lending you money (because that's actually what's happening) is counterbalanced by the additional business they get.

When GME popped off, they got a ton of sign ups to buy GME. This wasn't people using their own money to buy GME. This was RH lending you money to buy GME. And suddenly it didn't balance out. RH actually had a huge long GME position effectively. They actually borrowed a billion dollars to cover that and that was insufficient. So they stopped lending money to buy GME to avoid insolvency.

Remember too that they are lending you money on the promise you would fund the account. If people bought GME at $100 and it dropped to $30, RH would be left holding the bag as a significant percentage of people would simply avoid the loss by not funding their accounts. RH may have recourse to pursue that in court but that's going to get expensive and is a losing option all around.

That's literally all it was.

Some people were so delusional about what was going to happen with GME. They thought that since the open short interest exceeded the stock actively traded, the shares were going to go to infinity or something like that. That was never going to happen.

They also prevented trading by people who had long running, funded accounts. It was a mess and it wasn't only GME.

The fact that other brokerages could handle the counterparty risk with stronger financials than Robinhood (eg: by continuing to permit securities purchases) does highlight reputational risk in that you're clearly running an inferior brokerage compared to the competition. Ordinary market conditions wouldn't add visibility to this fact, but unfortunately there was always the risk and the situation had occurred.

Well sure, a new upstart brokerage doesn't have the spare capital when new collateral requirements are imposed with little warning. Otoh, they were able to get access to more capital in a couple days, so from a business continuity perspective it was fine. They still missed out on a couple days of trading though.

I've never done business with Robinhood, but they never seemed to be a quality brokerage. I seem to recall they didn't support limit orders for some time (but I could be misremembering). I do thank them for their work in reducing retail comissions to zero though.

>That's literally all it was.

No; that's really not what it was.

This was not about margin lending to Robinhood customers. It was about a multi-billion dollar increase in collateral required by the NSCC due to a large volume of unsettled trades in highly volatile stocks.

ref. https://fortune.com/2021/02/02/robinhood-gamestop-restricted...

And follow that to its logical conclusion. why were those unsettled trades? And no this isn't a T+2 issue.

This is blatantly wrong. The entire problem was the standard settlement delay, which requires sufficient collateral to derisk the settlement period -- regardless if they are from instant deposits or made from cash accounts. Robinhood could not have kept operating even if instant deposits were disabled and every account had margin disabled.

It really is a T+2 issue.

The NSCC has a rule-driven model that tries to make sure that it holds an appropriate amount of collateral for each participant based on risk of default between trade and settlement.

That includes a core capital model that’s derived primarily from value-at-risk based on portfolio size, volatility and the usual things.

It also has an excess capital premium charge which varies according to the extent to which the core requirement is large vis-a-vis a participant’s excess net capital (excess over the minimum regulatory capital required by the SEC); because those are precisely the cases where default is more likely.

In the case of Robinhood, it seems like their internal risk management team had failed to take into account the excess capital premium (which is a large problem on its own), and that premium was particularly large based on how poorly capitalized Robinhood was.

You can go look up details on the NSCC model; it doesn’t care whether your clients are trading on margin.

You really are quite on the wrong side of this discussion: where are you getting your information?

Pretty much everything you wrote is incorrect. You are describing margin lending, which had nothing to do with the issue. Robinhood instead blocked trading even for fully funded accounts. The problem wasn't the money that Robinhood lent you, but rather the fact that they themselves didn't have enough collateral to get cleared for the increased risk posed by these stocks. They were posing as a first-class brokerage without having the financial backing for it.

Moreover, the issue brought their business model into public spotlight, and people realized the problems with making money by selling order flows and the conflicts of interest that came with it.

My understanding is most people aren't commenting on this coherently†. The problem that halted Robinhood's GME trades, as I understand it, was that they had insufficient collateral to cover their clearing requirements. Clearing collateral isn't customer money; it's funds that clearinghouses require brokerages to post to protect them from each other. This, as I understand it, is money Robinhood was required to have on hand regardless of whether they had the money from customers to back trades. The amount is based in large part on the volatility of the stocks they're trading, and papers the illusion that stocks trade instantly when in fact the actual trade takes days to settle, during which the price of a volatile stock can swing wildly.

My understanding is that nothing you can do with customer trading funds will mitigate or offset your clearing collateral requirements. Brokerages that want to clear trades just have to have a big chunk of segregated money set aside to keep participating in the market. Robinhood ran out.

† because it's complicated, and there are lots of simple explanations you can come up with that are wrong, and we all have an Internet nerd tendency to fixate on a couple of axioms and derive the rest of the world from them, rather than reading the huge legal documents that set these things out

This may be true. But it's also true that Robinhood's business model took a massive reputation hit amongst its core user base as a result of this.

Some people were utterly delusional about what was going to happen with GME, but Robinhood's business model was based around providing low friction trades to the sort of consumer who makes casual trades based on what they hear on the internet: i.e. exactly the person most likely to be delusional about GME and likely to subscribe to someone else's theory it was all their broker's fault really. Even the name is a nod to the delusion trading stocks is a place for poor amateurs to fleece deep-pocketed professionals and not the other way round!

This is not true, and it's rare to see someone so confidently be so wrong.

Ya, the board and the VCs didnt care about that at the time.

There are talks of "late stage capitalism" all over the place - I think CEO compensation is one of the biggest hallmarks of it. Capitalism is supposed to naturally reward value creation to incentivize further value creation - somehow we've found ourselves in a situation where folks on the bottom of the pyramid aren't going to get incentivized for efficient labour no matter how much value they create - while folks at the top will be gloriously celebrated for even the most abject failures.

Most people are doing their best to be productive and most of their managers are trying to reward these efforts with recognition beyond a "thanks" but it becomes more difficult to do when we have an insane wealth sink at the top of our economy.

Ehhhh.. Economic rents and scarcity of talent with solid networks still apply to execs as much as pro sports.

You don't buy an exec because they are brilliant or hard working, you buy them for their network and how much they can grow the the business relative to compensation. At least in theory.

My own theory is that executive compensation serves a purpose that generally isn't said out loud. Usually compensation comes mostly in the form of stock, and the real reason for the large amounts is to reassure investors that if the executive finds him or herself in a situation where they have to make a choice between what's good for employees or what's good for shareholders, they'll be strongly incentivized to choose the latter.

It follows that if a CEO were to refuse stock compensation they'd be at risk of being fired by the board of directors, because owning stock is an unspoken qualification for the job.

> owning stock

And not cashing it out.

Right, selling it all looks bad and CEOs are often required to hold some minimum number of shares.

Vlad created an app and created value for lots of people. People chose to give him money in the form of investment for his company. I’d say plenty of people are motivated to become founders and create value. Most people just aren’t good at it or prefer a comfy and safe life. Nothing wrong with that either but don’t expect the same payout as someone who worked harder than you.

This really just seems like more a comment on how you relatively value networking compared to skills acquisition. Being a technical worker instead of a manager isn't a flaw - I am happy to continue delivering technical product to my company and I definitely deliver significant value.

I don't disagree that starting a company comes with risks and a personal investment that warrants increased compensation - but right now CEOs in the US make an average of 670x their employees... that is extreme.

I think the modern world has come to view low level employees as replaceable and thus the compensation is more focused on market pricing instead of individual value creation - but with CEOs that 670x is usually justified with how important the decisions they are making are but founders and CEOs are just as replaceable as anyone else.

There are different types of CEO’s: founders and non-founders. Founders make their money when their product gets used by millions of people. Is that worth 670x? Ultimately it’s worth whatever people will pay for it, so when you judge a founder you’re really judging the millions of people who parted with their money. I’d argue those millions of people are more “correct” than deciding an arbitrary number like 670x is too high.

The other type of CEO is one who joins after founding. Their compensation depends on providing tangible measurable growth for the company. Driving 5% additional revenue for a company like google is worth billions, so their pay is considerate with the value they provide. It’s been shown in research that a good CEO can make or break a company.

You say you deliver tons of value but you don’t explain why your pay is high as a technical worker. It’s high because the market is tight and there aren’t enough skilled technical workers. There’s plenty of other industries like biotech where they deliver significant value but don’t get paid as much as software. Same goes for CEO’s it’s an important position and there aren’t that many people that can do the job.

No one’s forcing those employees to stay working there. If he’s that bad people can just leave and work for a company that they like.

This is why we need wealth taxes. Confiscate the lot.

how much of that $800M was in stock vs cash?

The only thing that matters is how much he sold vs held. Cash is cash no matter how derived.

He's sold ~$55M worth: https://finance.yahoo.com/screener/insider/TENEV%20VLADIMIR

It's all stock from a 2019 agreement that vested on a liquidty event. His cash comp is $250k for that year.

I said the same thing. Taking responsibility doesn’t mean “I acknowledge that this is on me.” Of course it is. How about some accountability? How about getting your pay clawed back etc? Just “taking responsibility” is lip service.

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