Netflix Shareholders Vote to Reject Executive Pay Packages
nytimes.com
nytimes.com
For all the talk about the Deep State, the truly unaccountable power holders are the C-suite class.
Most billionaires realized that they do not need to be in the news or do any work, they can let the CEOs of this world take a small part of the profits and all the blame for what companies do. That is why we know nothing about the super-rich but many CEOs are always on TV. Smaller shareholders do not have power to change things.
In some sense I respect him for at least being transparent. Most other billionaires are only visible through heavily refracted PR lenses.
I suppose he gets all the credit for being authentic due to his telling the public not to buy TLSA shares, and the way he tries to work the number 420 into share purchase prices? Its all just theatrics, just as how he (and was photographed as he) carried a sink into the lobby of Twitter last year on the day he bought it. You'd think a heavily-burdened business leader would have things of greater import on his mind than cheap imagery.
Gates had a pretty good one somewhere, as he quietly slipped into the night. Bezos, Zuckerberg? They're too involved and don't seem to deeply care (though I suspect Zuckerberg's is doing better, what with that race they had him run).
There are a lot of irrational people on the Internet very quick to lump anything into an incoherent conspiracy and start flooding you with hate; for example, nearly every song on Youtube has a comment saying the song has Satanic or Illuminati references, or whatever flavor of conspiracy you like.
This is in contrast to Musk, who is hated for being a POS person, despite running companies that are somewhat respected.
https://en.m.wikipedia.org/wiki/Bloomberg_Billionaires_Index
Edit: Hi folks. Please remember I’m responding to a comment about public perception, not some ground truth idea of absolute wealth. These lists reflect what regular people are being told, and are probably a good indicator of public perception.
What is real disposable wealth?
This is true, but there will also be a set of just regular normal people who see what these powerful people are saying and doing and hate on them because what they are saying and doing is bad and hateful.
Naturally, some of it could have been organic. I sure remember having a more positive opinion on Musk based on what he was able to accomplish with Tesla and SpaceX. It is only later as he was gaining more spotlight that the eventual reports of his work practices became more commonly known. OTOH, Gates remain that old guy that talks about sustainability, saving the world and stuff.
Come to think of it. Maybe you are right. Musk does not have PR team.
Sadly we cannot trust all billionaires to be 'enlightened despots', but at least in this case I say we lucked out - there's plenty stupid or harmful things he could've done
Like, for example, purchase Twitter and grind it into garbage. I'm joking, of course, but goes to show why Musk is considered an imbecile _despite_ having money and Gates is considered intelligent because he made money (and spends it well).
I'd point you to the relative popularity of the Media that is down on Musk and instructs others to be so.
We (in the US) should all worry as they move to private islands/beaches/New Zealand.
But G investors won't be very strong as a block on their own. There's a large block of environmentalists (maybe call them "E" investors), and another block of people who care about social issues (call them "S" investors?).
Then people can get together in one big, ESG, block, to try to make sure that modern companies think about environmental, societal, and corporate governance issues.
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ESG has plenty of faults mind you. But the methodology to organize our money into blocks that focus on these issues is sound. We just need to come up with a better governance issue for ESG itself.
I was once also convinced that ESG would make a difference. But this exposé by Aswath and the results of deploying "ESG" so far have proven that this concept is worse than worthless, but instead plain harmful (the video goes in details about this; e.g. you can package the most harmful activities behind some kind of ESG principle).
If the CEO only has one job and that is to make profits for shareholders that is a single measurable benchmark the shareholders can hold him accountable to. But now the CEO can make whatever decision he would like and use nebulous and hard to track ESG goals to justify it.
Well, that's where ESG is going by the wayside. But that's the nature of working as a block, there's so many constituents here our voices get watered down. But "as a block", our money is much larger together.
ESG has proven that it is possible to create these pools of money that tries to think about these issues. Moving forward, ESG investors (and ESG managers) need to be more clear on what those goals are and who to reward, and how to balance profits vs social good.
That's never been true, though, and arguably for good reason. The CEO is supposed to act in the best interests of the company, which may not be ideal for short term profit. Trying to simplify to that metric is likely to make the bad behavior even worse.
You're the one who added "short term" to profit.
The CEO is supposed to maximize the discounted future earnings of the company.
For example, you could say "we need to beat climate change, otherwise there won't be any profits on a dead earth".
That's why the metric is discounted future earnings. So that you can't "justify almost anything".
But a group of investors, calling themselves ESG, are now caring about ESG issues. If ESG investors grab hold of your company's shares and become the owner of the company, it becomes the company's responsibility to listen to the (now ESG-aligned) shareholders.
Its mutually beneficial. ESG has enough money that its worth pursuing their money. And ESG is a vague enough political concept that the pool of investors is rather large in practice. Yeah, people like to make fun of how stupid the metrics are and all that, but... vagueness is kinda the point. They're trying to be as large as possible so that ESG issues can even come up in board meetings.
The normal fund won't care about ESG at all and your money will go to all kinds of different companies.
The ESG fund will market itself as ESG. You probably should read up on the benchmarks that the fund cares about.
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Ex: iShares ESG Aware MSCI USA ETF (ESGU) fund. You can buy it, or not buy it. ESG isn't about getting "all" the investors involved. Its just about collecting enough investors together that the pool of money becomes a feasible corporate-politics entity.
When Blackrock makes an ESG fund, they'll look at governance issues like "Oh, Netflix has crappy governance", and then refuse to give them any money. ESG-funds focus on funds that have good environmental/social/governance records.
If anyone wants ESG-money, they have to match the baseline requirements of ESG-investors and what ESG-funds will offer. Otherwise, you don't get our money.
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The other reason why ESG works, is this "G" issue. Companies that care about shareholders will, on the average, return more money back to shareholders over the long run.
Companies like Netflix who hoard power to themselves and overpay their C-suite are obviously wasting money anyway, and therefore make for crappy investments. "G", theoretically, is just a good idea for investors to think about _anyway_.
AKA: If Netflix are a bunch of assholes, no biggie. I can invest into Disney instead, who has a much better G/Governance structure. And Disney+ is kinda kicking Netflix's ass right now anyway, so I think there's a good chance I'd make more money.
If Netflix wants my investment money (or the investment money of anyone else in the ESG group/fund I'm part of), they'll need to fix their G/Governance issues. If for nothing else, for more fair compensation of their C-suite.
I also think there's some inherent conflict in the S part of ESG investing. i.e. a truly socially responsible company would be returning most of its earning to the workers who actually did the work that earned that money, rather than funneling it to shareholders. Which makes those companies a bad investment, which means ESG funds that extended their S goals that far will fail and ESG funds that don't will get good returns for their investors and continue on - so by definition the S goal is limited.
The main thing investors have been focused on in the last 30 to 40 years has been lowering fees, in particular "passive" investing which is based on very obvious metrics ahead-of-time.
"Active" investors may have cared about these governance issues before, but their fees were just too high in practice. But I think we're seeing the blowback now as more-and-more companies come out with crap governance structures, knowing that they can take advantage of the easy-money from passive investors.
I don't know if things will swing the other way. But ESG seems like a way to keep fees low but still have a degree of thought put into corporate politics.
I'm not "bullish" on ESG btw. But I think its a step in the right direction, and I think that its a good thing that people are thinking about how to solve the issues that arose from this era of passive investing. Whether or not ESG truly solves the problem remains to be seen however.
Other companies such as Google, Meta and Berkshire Hathaway have similar arrangements.
They could finally unleash innovation without the constraints of dumb Wall Street and institutional investors who just "didn't get it"! They wouldn't be at the supposedly short-term whims of the fickle stock market!
I'm happy to see the opinion here finally shifting. It seems people are finally realizing there is something to be said for actual corporate accountability to shareholders.
Massive corporations are built on providing value to consumers. Netflix and its ilk have unquestionably done so. Why do we need to dive into the internals of how they work and what they pay their executives? What does it matter? They provide a service that millions (billions?) of people are happy to consume. Isn't that enough of a public good?
Why do we need to dive into the internals of how they work and what they pay their executives? What does it matter? They provide a service that millions (billions?) of people are happy to consume. Isn't that enough of a public good?
Don't think, just consume product and get excited for next product.
It's a means of retaining power that was already concentrated in the hands of the founders. You've failed to explain why the are obligated to give it up simply by listing on a public exchange (hint: they're not).
"publicly traded" doesn't mean anything besides the fact that shares are available on public exchanges. The fact that they're available on a public exchange is no guarantee that you'll be able to use them to influence the way the company is managed, or that the company owes you any accountability at all beyond what is strictly legally required.
> If you want to trade ownership for access to deeper capital pools, then you have to govern through merit rather than clever structures
What if you want to trade a share of future profits for capital? Why is that "wrong"? It seems like in your world non-voting shares are immoral.
> Don't think
Laypeople are poorly equipped to speculate about highly specialized work (such as executive management). Dunning Kruger applies here. You didn't actually answer my question though: assuming you're not a Netflix shareholder, why does it matter to you what Netflix pays their executives? Haven't Netflix earned their money? Doesn't that give them the right to distribute it as they see fit? What is the basis for your claim otherwise?
It seems like in your world non-voting shares are immoral.
Yes. It promotes unaccountable rentier capitalism, and I do not consider market price signals alone a sufficient check on human greed to yield optimal outcomes. The oft-stated benefits of price theory depend on a market in which perfect competition obtains (total transparency, zero cost to entry or exit of the market, completely fungible commodities), and most markets are not that simple.
Laypeople are poorly equipped to speculate about highly specialized work (such as executive management). Dunning Kruger applies here. You didn't actually answer my question though: assuming you're not a Netflix shareholder, why does it matter to you what Netflix pays their executives? Haven't Netflix earned their money? Doesn't that give them the right to distribute it as they see fit? What is the basis for your claim otherwise?
I don't owe you an answer, especially not with this rude hectoring behavior. Work on your manners.
It matters because corporations enjoy great legal protections by being able to operate within a wealthy and highly developed polity, and by accumulating wealth are also able to shape that polity by lobbying for favorable tax, regulatory treatment and so on. So in that sense, executive compensation is a topic of general public interest because executives have an outside impact on social norms and future policy. As far as Netflix is concerned, the company has earned its money but some of that money has been earned on the backs of writers, who have offered a good argument for why they are underpaid relative to historical standards. As a writer and WGA member myself, I'm in favor of Netflix giving writers a better deal rather than merely exploiting their market dominance. And while the shareholder resolution is not binding, apparently a majority of the owners of Netflix also feel that writers' contributions to the firm's success has been undervalued and expressing their opinion on how that wealth should be distributed.
As I said earlier, if you don't want to be accountable to a large group of owners, don't become a publicly traded company. Stay private, govern the corporation by fiat, and and do what you want within the law. It might take a little longer to achieve market dominance in your industrial sector, but if the world is truly meritocratic then success is presumably assured.
Optimal for who? By whose measure? Your position seems to be based on an assumption that you know what's optimal for all of us, and that you're willing to impose that on others. Pardon my disagreement. "Rentier" capitalism also assumes that you can distinguish which economic activity contributes to society and which does not. What criteria or principles do you use to make that distinction? Honest question.
> corporations enjoy great legal protections by being able to operate within a wealthy and highly developed polity
It is the liberal economic policy that birthed the wealthy and highly developed polity, not the other way around. Corporations enjoy great legal protections because otherwise we would not benefit from their existence. And benefit tremendously we do. My whole point is that we should leave them well enough alone because we all reap incalculable wealth from their marketable innovations. We already have a golden goose, and you seem to be suggesting that we smother it with governance.
> executives have an outside impact on social norms and future policy
How would this impact be curtailed by a more stingy compensation package? Executives wield their influence via the corporations they control, not their private bank accounts.
> the company has earned its money but some of that money has been earned on the backs of writers
On the backs of writers who were compensated for their services at a rate agreed by both parties? Seems like a pretty fair deal to me. I don't see why anyone should be paid more than they can freely negotiate for their services from people who are interested in retaining them. In a free society, people are inescapably paid according to how expensive they are to hire, train, and replace. It's the same reason why writers are paid more than agricultural labourers, and executives are paid more than writers. If you can devise a scheme to hire 10 people at $10/hour and generate $1,000 in value, I'm having a hard time understanding why the remaining $900 isn't entirely yours. I see this sentiment a lot and honestly hope you'd be so kind as to explain the calculus here.
Is this just your best guess? Just riffing? Because if you read the article, you'll see that last time it seemed to have made an actual difference:
"At that time, the company had already made changes to its 2023 compensation program for its top three executives, which in part capped each one’s salary at $3 million, required a minimum of 50 percent of compensation to be tied to stock options and introduced a performance-based cash bonus."
This is because the stock owners are not legally the owners of a company, they are just another stakeholder.
* https://hbr.org/2012/07/what-good-are-shareholders
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2277141
* https://www.ft.com/content/7bd1b20a-879b-11e5-90de-f44762bf9...
* https://www.forbes.com/sites/petergeorgescu/2021/07/21/the-s...
Which is optimal, because in a direct democracy, you get unelected de-facto leaders with zero transparency or accountability - it's simply impossible for a country of any nontrivial size to vote on every relevant issue (or draft bills through a purely democratic process), and so you'll get social media influencers and celebrities and political groups instead that sway the thoughts of millions of people, but without all of the constraints that elected leaders have.
If you'd please review https://news.ycombinator.com/newsguidelines.html and make your substantive points thoughtfully—and avoid flamebait and name-calling—we'd appreciate it.
A move to appease the public and writers, but room to backtrack if desired?
In theory, it should scare the board away from this compensation level (and provide justification the board can use to offer a lower compensation). If they fail to do so, it might be used by an outside group to try to take over the board. After all, it's like most elections. The counterbalance is you vote on the board and can get them out.
The assertion that paying more money to the folks at the top has yielded commensurate returns is really not backed by ... anything at all, as far as I can see.
Actually another comment links to an article about:
“CEO Pay and Performance Often Don’t Match Up: The S&P 500 CEOs who received the biggest pay increases scored middling shareholder returns”
- comment link: https://news.ycombinator.com/item?id=36168067
You have to look at how the same stock would of performed with a different manager.
There are many factors outside of management's control that will dictate the return on a single stock. But don't confuse that with the fact that management decisions do have an impact and can make a large difference.
The problem with the executive compensation ratchet of the past few decades is that it is completely divorced from any actual measure of C-level impact. If things go bad, not their fault - if things go well, it couldn't possibly have happened without these strong leaders at the helm.
I can't imagine a shareholder in either company also thinking you know...these guys at the top of both companies have been paid too much, the various right and wrong decisions they've made turned Amazon and FB into the 4th and 7th most valuable pubicly traded companies in the world in 20 years. They should have paid their c-suite half and become what? Still the 4th and 7th most valuable companies in the world? We know this why?
At the end of the day it's a very hard job, and no one has any idea who the hell is good at it. Prior performance is a good signal, but who knows really? Why would you go cheap when the potential for billions of dollars in wealth destruction/creation is at risk?
Yes, 100% absolutely, yes.
If you are able to deliver a better result than "Person X" who is paid more than you, and if you get a chance to deliver that result, won't you demand to be paid more than the "Person X"?
And for the company who is paying, who already seems to agree to pay that much for "Person X"'s result - would likely to be happy to pay you the same or more since you are delivering more
Where am I wrong? Isn't this just capitalism? Help me understand :)
If you voluntarily say I need only half the pay of "Person X" aren't you basically being charitable or just sacrificing what you could potentially get? I am not saying that doing this is wrong (probably morally right) but this is probably rare.
But on your point, what's the root cause of this issue? Why do people hire people with outsized compensations when the other option is empirically proven?
You can use archive.is to read it if you don't have a WSJ subscription: https://archive.is/bkDCO
Note, I'm not saying "being a top exec takes no skill"; I'm saying "many people have the skills required, they're just rarely given an opportunity to demonstrate them in the same way." (I'm also saying "many execs do not have any significant skill to bring to the table; all they have is connections and money".)
Essentially, you're repeating a variant of the Just World hypothesis—that people who have skills that are relevant to high-paying jobs must be highly-paid, and people who are highly paid must be skilled enough to warrant it.
Neither of those propositions holds up to actual scrutiny.
The problem is that if they have never had the opportunity to demonstrate it then how do you find them in the first place?
Some of the variable factors that will make the actual scrutiny extremely hard are human emotions such as desire, ambitions, ego, time, impact to morale [employee, shareholder, customers]
Imagine if how long it takes the board to find a replacement CEO was how long it took to restart a failed server ... They just don't have contingency plans and so they shovel money at the CEO to ensure that the fact that they don't have a contingency isn't a problem.
I completely agree that the whole thing is influenced heavily by how its going to "look" - perception.
But being in a Disney situation where your CEO (Iger) wanted out and choose a poor replacement for himself. (Note: Iger choose a poor replacement not the board, they're useless). And now Disney stock is at the same value in 2023 as they were in 2015.
If the Disney board actually had a plan on who a replacement CEO should be they wouldn't be in this problem.
Most CEOs are doing it for other reasons besides money (personal enjoyment, thrill, respectability, “duty,” etc.).
Because a few bucks compounded by the marginal next best CEO might be a major improvement for shareholder.
The real reason boards don't cheap out is because no one has ever[1] got fired or sued for paying top dollar for the best when things go to crap and everyone else is pointing fingers
[1]: don't get pedantic about this common phrase
Some professions push society forward and create long-term wealth. In my mind these are professions where you make decisions with skin in the game, persuade others to do things a better way, and all of STEM. Leadership, sales, engineering, science.
Other professions exist to describe what these prime movers do, or to maintain their work, or to support the people doing it. This is also vital and every society needs this too, but it's just not as important.
So, if in the USA they pay engineers 3x better than in other countries, the question is: what the hell is the rest of the world thinking?
Countries like India, China, Israel, and South Korea also have tech industries that can pay EU level salaries (and in Israel's case US level) despite a cost of living comparable to Eastern Europe (excluding Israel).
The reason is those counties and the US have an oversized software+hardware industry with a very mature VC+PE+IPO market within the tech sector or a pipeline to the US's financial sector, and are thus able to make 8-9x multiples of revenue based on a single IC.
Most of the EU doesn't have software+hardware companies with comparable revenue multipliers. That said, in certain niches (eg. Pharmaceuticals, Finance, Defense) in some regional employment markets like those in the UK, Denmark, Netherlands, and Ireland might be able to offer US comparable salaries (not SV level but a decent $70-100k base)
— “Who wants to work that hard for nothing?”
— “We’re a tech company? What do we actually do? Something that: atomizes social relations; enables the violation of people’s privacy and rights; or simply plays hot-potato with funny money? Yeah, pass. My friends and family would think I’m a chancer.”
— “What you’re doing goes against local laws and ethics. You can’t do that here.”
— “A business should help the country and its people; not the people that built it.”
— “Spending all my free time to become marginally more knowledgeable and skilled than my coworkers/‘competition’? I’d rather spend time with my friends and family — or a hobby.”
— “Money? What am I gonna do with money — buy a house? Then what.”
Education and health professionals are much more valuable to society, and it's criminal how little they're paid in general. Sure, they ultimately depend on STEM fields, but without them our societies would literally collapse. The "prime movers" as you put it depend much more on health and education professions than the other way around.
Until recently, the medical profession was literally leeching people until STEM stepped in with germ theory etc. The life expectancy value of going to the doctor was negative!
The US pays salespeople, leaders, entrepreneurs, and engineers a ton of money. And it shows in the results.
Only? No professions would exist without teachers. Education is fundamental to our society, and has been for millenia. There's nothing more transformative than a good education.
> No science would mean 90% of the value in education is gone.
Again, I'm not saying that science is not important. It plays a critical role in driving other fields forward. But I'd argue that an average teacher and health care worker are more valuable to society than an average IT professional, while the discrepancy in pay between them is abysmal. We only care about health care workers in times of crisis, but then quickly forget about them when it's not trendy to call them "heroes" anymore.
> Until recently, the medical profession was literally leeching people until STEM stepped in with germ theory etc.
I'm not talking about scientific breakthroughs that push other fields forward. Those obviously deserve the merit and recognition they have received. I'm talking about the value of the average working class professional in these fields, and their relative salaries.
> The US pays salespeople, leaders, entrepreneurs, and engineers a ton of money. And it shows in the results.
What results? How is a software "engineer" working for an adtech or social media giant to build spyware valuable to society exactly? Or yet another startup peddling their bullshit product designed to lure in investors and make their shareholders rich? Or the sleazy sales people making all those deals happen? You're telling me that this is somehow more valuable than health workers literally saving people's lives, or teachers building future professionals?
One group lives in luxury, while the other can barely make ends meet working a much more stressful and laborious job. This shows in the results, alright.
Thinking that somehow our profession is more important is indicative of the tech bubble we're in. But I'm not surprised to see such mentality on this forum.
If we had no tech, education would consist of learning history and poetry. It would still be useful, but would not transform our world.
This belief is a big part of why we have such a crisis of culture and politics today.
Education in civics and humanities are vital for understanding our culture, other cultures, ourselves, other people, our relations to them, and how best to participate in our society and government.
Education in practical skills—the kind that used to be taught in "home ec" courses—is vital for being able to navigate this world safely and effectively—things like how to make basic foods, how to balance finances, etc.
But if it weren't for leaders, salespeople, and STEM, we'd still be throwing rocks at sabre-tooth tigers; naked, hungry, sick, and hoping for the best.
Nearly every good thing in our world exists because we invented it, or invented a way to use a natural thing. Everything in home ec and all of bookkeeping were created and spread by prime movers.
The past few centuries of economic growth were ushered in by the industrial revolution, a staggering increase in global wealth culminating with people so rich that they have time to question the value of STEM, and with so few problems that they think what we're living through right now qualifies as a political crisis.
That said, Berlin is definetly much cheaper than other cities due to the Cold War. It's basically Western+Central Europe's Austin.
Capitalism is imperfect, but it works pretty darn well -- even for the people who don't do any work.
You could try to pay the CEO of Netflix $500k, but you're going to be out a CEO pretty quick. This is just how markets work.
Not trying to be pedantic, but genuinely curious.The size of a company is not directly correlated to how hard is it to managed. MacDonalds for exemple is a well oiled machine whith a well defined market, well defined business model. I am gonna assume that the role of the CEO is more about "dont't ** stuff up" as opposed to improve/innovate. Compare that with say openai... which is in a crazy competive market operating at the apex of human knowledge.
> We expect the CEO of McDonalds to make more money than the CEO of a local diner.
We should compare the CEO of McDonalds to something more realistic than a CEO of a local diner.
> It would be easy for Sarandos to get an executive role at any other tech company, which is not the case for the CEO of a local business.
Then let him...
> You could try to pay the CEO of Netflix $500k, but you're going to be out a CEO pretty quick. This is just how markets work.
The is a large difference between 40 millions dollars and 500K. Nobody is trying to pay CEO 500K, the fundamental question is why not 20 millions or 10 millions.
I think the general sentiment is that the usual market forces do not apply to CEO and the way their salary is computed, and that's an issue.
This is exactly wrong though, and demonstrates why laypeople undervalue executive leadership. Staying still in an evolving market is a doomed strategy. McDonalds has transformed its image to stay relevant many times in the last few decades. McCafe is a great example of this.
Also, the size of a company is a huge factor in the complexity of managing it. The more people you need to have pulling in the same direction the harder it's going to be. Leading tens of thousands of people without creating an obstructive bureaucracy that stifles innovation is very very hard.
And yet that's exactly what a lot of CEO have done in the passed and still have had great compensation packages. Like intel before Patt for example.
> Staying still in an evolving market is a doomed strategy. McDonalds has transformed its image to stay relevant many times in the last few decades
Sure, the "specific CEO" doing this evolving strategizing should/could be compensated "out of bound".The main point i am making is the life of a company is usually cyclical : Some crisis, some coasting... But CEO pays never reflect that.
> The size of a company is a huge factor in the complexity of managing it.
This is the logic that creates "empire building" inside company. I am not sure there is any evidence that this is correct. Again, i am skeptical that the size in term of number of employee is a "huge factor". Again we talking about companies which already have precesse, departement etc...etc... well defined
Hopefully the organization is capable of weeding-out poor performers, but it's no easy thing. Again, the same goes for executives. Poor performers (should) get fired by the board. If they're not, the board is failing. In this case we're talking about an exec who has been at Netflix for 20 years and was one of the people who built the company from nothing. I don't think anyone is suggesting he is a poor performer.
You seem to be labouring under the assumption that leadership is easy. It's anything but. Well defined processes, high-functioning departments, all of that is fragile as hell. A few key people turn over, formerly-respected processes start being ignored, things go to shit. This has happened time and again. One of the jobs of leadership is to keep people accountable. Why would anyone follow a process that no one is checking on? Especially if the person is new or they feel the process gets in their way (which it often does!).
The size of a company is very correlated with the value add between a good CEO and a bad CEO, or between a good CEO and a great CEO. It's the same reason why basketball players make more money than ping pong players. It's not that basketball is harder than ping pong, it's that way more people watch basketball so there is more money to be made by the team that has the best players. Because the CEO's decisions are leveraged by the scale of the business, big businesses are willing to pay top dollar for whoever they think has the best shot at running the company well. Of course, this judgement might be incorrect, because the world is hard to predict.
Just because performance differences are less visible in CEOs than they are in basketball players doesn't mean the differences don't exist, or are less valuable.
This is true for any other employee. If a dev optimize a code base by 1%, that 1% value add is correlated to the size of company : could 10$ for a small company or 1Mill for a large company.
A company is a collective of individual working together to preduce (in general) more than just the the sum of the output of each individual. So it's normal that any individual output value would be a function of the collective output.
However, the current social contract is that "regular" employee trade some of the upside of the synergy for less risk and more predictable compensation. The question is, why are we so comfortable treating the CEO any differently.
CEO is a job like any other.
Maybe we should index all employees comp to company performance with a base comp floor...
We expect the CEO of McDonalds to earn hundreds of millions even if he destroys McDonalds as a functioning entity.
It's a kind of Stockholm syndrome.
We should really think about performance based incentives - e.g. average pay + shares that start to vest 7-9 years later.
Let's go one step further and replace that one CEO with 3 employees in some part of the world with lower wages, for 50k/year each.
Ask them if they will expect the CEO pay to be zero if the company doesn't show a profit?
We’re not even pretending to care about “fiduciary duty” anymore.
The question is also, would he quit if they cut his compensation in half? If not, it's free money for the business. The companies nickle and dime every one of its business relations, why shouldn't they do it to the CEO? He's one of the bigger expense lines.
It’s absolutely not. It is used for all sorts of things, including PTO accrual, bonuses, multi-year tenure benefits, etc.
That being said, I've never heard of a place that _literally_ ties PTO to tenure -- if you join the company in a senior position, you can always negotiate to start with a similar amount of PTO as someone who worked their way into that position internally.
You can usually also roll them over to the next year up to some amount.
It is not. Most places I have worked, longer term employees are given recognition, extra bonus, more vacation days and so on.