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Comment by metabagel | Hacker News Reader

Why does this argument never apply to executive compensation?

https://www.businessinsider.com/uaw-strike-automaker-ceo-pay...

Executives don't need to be productive, they just need to promulgate the bizarre idea that people higher up in the hierarchy inherently deserve more pay for some reason.

Executive compensation is a drop in the bucket compared to the total salaries for all the rank-and-file employees.

According to your article the average hourly labor cost at GM is $60. Assuming 2,000 hours per year, that is $120,000 per employee. For 92,000 U.S. employees [0], the total is about $11,000,000,000.

Another way to look at it: If you distributed the CEO's compensation ($30,000,000) among GM's U.S. employees (92,000 [0]), you'd give each of them about $326.

[0] https://www.gm.com/company/usa-operations

This is so often completely ignored and IMO it’s the real reason why executive pay is so high. Companies are willing to bid up executive pay but not worker pay because worker pay comes with a huge multiplier and executive pay doesn’t.

An executive can also completely tank your business in a way that a line worker cannot.

So it's still a bit of a paradox why you would pay anyone so much over the odds. How confident can you really be that this one guy you found is going to increase profits by 10%? And if you do find this guy, why isn't there another guy with similar experience offering the same tradeoff?

That's exactly why they are paid so much. It's more important that they don't fuck things up than "demonstrate productivity".

That's what I'm saying doesn't make any sense. How do you know they won't? Plenty of people have messed up a business, who's to say your guy with pedigree won't?

Why isn't their compensation two directional then? Why not give them both options and have them sell puts that company can exercise. So if company loses 10% of valuation they will pay company some money...

Executive compensation is a function of profit/capital allocation for shareholders away from labor.

This doesn’t show the full picture. It’s not about redistributing their salaries. Have a look at the excess returns procured BY labor and where that went.

You know why.

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