When CEOs Are Paid for Bad Performance (2005) | Hacker News Reader

When CEOs Are Paid for Bad Performance (2005)

gsb.stanford.edu

91 pointssegasaturn106 comments

The further I've risen in my career the more I've grown skeptical of the CEO role and the compensation most of them receive.

The truth is that there are truly important CEOs without whose leadership their companies would flounder, stagnate, or die.

At the same time I've been wholly unimpressed with the leadership of the vast majority of CEOs I've met, not just from an outside looking in perspective but from a working closely with them and meeting them personally perspective.

I've met any number of VPs, COOs, CFOs, etc. that are extraordinary leaders and I've met mostly CEOs who exploit those people and the value they create for their own personal gain.

Yeah the older you get, the more visible the grift is. CEOs/Elite companies hide behind abstractions of eliteness/prestige. From the outside it always seems they are on the ball. On the inside you realize the guy that went to Harvard that is now CEO, got into Harvard due to rowing, and fell upwards for 15 years afterwards. Close interactions with these people will almost always reveal that they are mediocre regular human beings that got put into a seat early in life.

While you were toiling away on some task at work, he was busy trying to meet people higher up the chain.

The kicker though is that Harvard does attract real outliers (mark zuckerberg, bill gates), and so the name brand rests on them identifying one guy a year that might change the world.

Funnily enough, both names you mentioned dropped from Harvard

they still attracted them.

Is Bill Gates a real outlier? Seems to have massively exploited the people around him. Didn't even build DOS, got the contract because of parents connections. If he's lucky, his lasting legacy will be donkey.bas.

I think you are massively underestimating the amount of work he put in, and his abilities outside of just this deal.

He didn't just buy DOS, he made sure it kept up with the best OS on the market, including Apple's. He also recognized the initial quality of DOS outside of several other OS on the market, which he learned because he was an expert in the field and made BASIC. He also Microsoft ahead of the curve at almost every point during the computer revolution.

lol. Basic was made by John G. Kemeny and Thomas E. Kurtz at Dartmouth College in 1963.

How were they ahead of the curve? By implementing a GUI well after Apple had stolen the designs from Xerox?

Microsoft didn't even write the port of qDos for the IBM PC, they had to get Tim Paterson from SCP to write it for them.

I meant a BASIC interpreter for the Altair, but HN won't let me edit post. There's no doubt that Gates is a capable programmer.

Microsoft was successful for a reason. They were much faster, and better than other computers. They demolished the personal computer market for decades.

Wouldn't you say someone who became a billionaire in their lifetime is by definition, an outlier, whether or not you agree with how they got there?

No. Outlier from what? We're talking about the distribution of grift among executives, not wealth among the general public.

The persons might not posses any outlier capabilities. A big part of success is being born in the right circumstances at the right time and being lucky with a few things.

> On the inside you realize the guy that went to Harvard that is now CEO, got into Harvard due to rowing, and fell upwards for 15 years afterwards.

Not just the ones that started at Harvard, though. The way the corporate springboard is built, at some point in every executive's career, gravity reverses itself, and they simply cannot fall at all (unless they choose to)... You never see a SVP at a FAANG drop back to being a mere Director after a bad run. They will always fail their way into CEO at a smaller company or something. You never see a Director go work for some other company as a Software engineer after failing to get promoted. None of this class ever seem to be worried about "Crap, what if there are layoffs--will I need to be an IC (individual contributor) for a bit until I find my next VP job?"

I'm closing in on 50, still as an Individual Contributor worker bee. If I lose my job, I face a non-zero likelihood that I'll be unable to find anything else besides stocking shelves at Home Depot. If I were ever to reach "Director" level, I'd never have to worry about that again.

> None of this class ever seem to be worried about "Crap, what if there are layoffs--will I need to be an IC (individual contributor) for a bit until I find my next VP job?"

This is not entirely true. Some directors do go to another company at a Sr. Manager level.

That said, the reason they appear to always find another job at a sideways or higher level is because most people at director or VP level at successful companies just retire and become "consultants" or "career coaches".

For those that are still looking for a titled job, there is always a smaller company that needs experienced managers. They will give the title to make up for lower compensation.

These upper managers hire executive recruiters who find them opportunities. They sometimes rely on their network.

These managers are never questioned on technical skills, market understanding or ability to lead which is why their likeability gets them the next job.

But realistically, most of them retire with a few million. They are just not in the market like us plebs.

Personally, while reading this, I was thinking of the recent waves mass layoffs (just today, massive layoffs and studio closures at Epic Games and SEGA), all while executives appear to be comfortable and keeping their million dollar salaries. I wonder how many jobs could be saved if a CEO making $40m+ just temporarily cut their salary? And I wonder how much more productive could a company be if so much of its funds weren't being funneled into the executive suite's pockets?

Famously, Nintendo's president Satoru Iwata slashed his pay in half in 2014 due to the failure of the Wii U, and imposed pay cuts of 20-30% on all other executives. I don't recall any layoffs being announced in this period.

https://www.polygon.com/2014/1/29/5356812/nintendo-boss-sato...

It's an attractive idea for sure, but it's probably not that much in the scheme of things.

Say a full time employee earns $150k - total cost to employer is usually 2x so $300k. $40m / $300k = ~133 jobs. So if the company is laying off 10k employees it's close to 1% jobs saved - almost a rounding error. And that's if you cut the CEO's pay to $0.

A CEO would have to be earning something like 1000x more than their average employee for it to start making a really noticeable difference in actual layoff decisions.

Where are you getting these numbers? Ten thousand lay-offs seems like an arbitrary number to make this math look better. The most recent lay-offs by Epic were less than a thousand, roughly 830. Using, that number, even with the other figures you've chosen, a CEO pay cut would've definitely been noticeable.

This is a good point, the smaller the layoff the more you can argue that the CEO (or others) should just take a pay cut instead.

Your calculations seem so complicated that it is hard to point to any fault in them... An executive often earns 50x of lowest paid employees. Cut CEO salary in half saves 25 jobs.

I would say the CEO could still live comfortably and be proud of keeping those people working while adding value to the company.

> I would say the CEO could still live comfortably

The CEO would take another job. It isn't about comfort.

>Say a full time employee earns $150k

I don't know why you would. That's an egregiously high mark to use for a general statement on CEO vs employee earnings. It better figure is probably close to 1/3rd than even 2/3rds of that. Their total cost is not going to be 2x.

I don't know why you'd obfuscate with such unrealistic numbers, because the fact remains that cutting the CEO down to 0 is probably still not enough. The correct thing to do would be to cut the CEO down to zero AND cut most of the C-suite a significant portion* AND cut management and supervisor roles some smaller amount AND cut a nominal amount from all employees earning over a certain mark (perhaps 2x the median). With that, you will have executive, management, and labor all alike able to weather the economic storm. I find that more morally palatable than the seeming status quo of kicking out the workers least able to deal with a downturn.

*(as mentioned in another comment, Nintendo did this after the Wii U came in last during its console generation)

A VP at Google makes about 5-10m in comp with SVPs making about 2-4x that (and CEO about 10x that (these are ranges so very unlikely will have some one with all those multipliers in the "extreme" range)

There are about (guessing and talking to people) 100-200 VPs conservatively and a dozen or so SVPs. So cutting leadership comp is reasonably feasible to save 10k jobs no? We haven't even talked about senior directors and directors.

At an average cost of 300k that comes to about $3B? At 5M average VP comp, even halving VP comp alone (not unreasonable given company direction is largely impacted by VP perf?) can save a good amount of job?

True, I think cutting pay for all executives would make a meaningful difference in a layoff. But don't forget that some fraction of execs might also be getting the axe in said layoff. GP was talking about CEOs specifically.

>earns $150k - total cost to employer is usually 2x so $300k.

2x? why this much? Oo

My bad, looks like the direct costs of an employee are more typically 1.4x the salary. That's basically taxes, benefits and perks and benefits. There also indirect costs like equipment, working space and administration so I believe the true cost of having an employee actually doing work is higher but probably more like 1.6x salary and not 2x.

My brother was the ceo of a smaller company. In 2009 he cut his own salary to be able to retain employees. A few years later he resigned when the founder and chairman was pushing him to do something semi-illegal. While he was looking for a new job, which takes some time at this level, his wife divorced him and somehow instantly had a new relationship.

There's a theory that the second-level, C-suite employees all are entered into a gladiator contest to get the giant extra bump in pay that comes with being chosen to be CEO. So they work with great energy and ingenuity to make things happen, hoping for this 5x bump in pay.

Only one of them gets it, and he/she may be erratic in the very top role. But the next layer repopulates and the process continues.

Would be more convincing if the in-house promoted CEO wasn't that rare a sight. I guess it's a popular theory amongst those second-levels, on the surface because it tells them of that 5x future, but deep inside perhaps more because it paints them as almost super-human productivity outliers.

The common theme I've noticed is that they are extremely charming and interesting people to talk to.

Adam Neumann might be the best example of a CEO that was propelled into billions on charisma alone. We love the story of the heroic CEO that inspires everyone.

I actually think that Adam Neumann has real talent in building a brand/product. He may have sold the top of a worthless company, but he did so masterfully.

"Talent" is an interesting way to put it. There has to be buy-in on the other end, of course. Being realistic: how far would he have gotten shilling his pump-and-dump as someone with a similar background who was

>black

>a woman

>disabled

>short

>lacking his luscious head of hair

? I think the reality distortion field tends to fail in those cases. His product was a sham and his brand cratered when that was exposed, so it's probably wrong to call him "talented" in that regard. Rather, it's more correct to say he possessed qualities (earned and not) that, even today, inspire positive feelings in many. That's unassailable, as we sit here today talking about someone who objectively ruined thousands of lives as someone with "real talent" and not potential "guillotine fruit" or a "cement shoe male model."

Kim Kardashian did it pretty well with crypto. Elizabeth Holmes was exceedingly good at what she did. Brian Kolfage did exceedingly well at conning people into millions. Bernie Madoff was only 5'7'', SBF is only 5'8''. This is a short and certainly non-exhaustive list.

I think given sufficient charisma and just enough but not too much mystery around the product alongside short term promising returns anybody can fall for what's being sold.

It's not a binary. Kim Kardashian set the Western beauty standard for a few years, Elizabeth Holmes and SBF had direct relatives with exceedingly helpful credentials and connections, Brian Kolfage is a decorated veteran who looks "normal" (in our image-obsessed culture) in any bust shots you may find of him, and Madoff started his career when the average height was lower (and followed the pattern of shorter men not becoming hugely successful until later in their careers).

Most of the people on your list also benefited hugely from affinity bias in some shape or form, which probably speaks to a large component of what's actually going on here. A marginalized identity can be disqualifying for most would-be marks, but another aspect (or even the same aspect!) of one's identity or presentation can override people's critical faculties and lead them to trust you when they otherwise wouldn't. This itself is an aspect of "charisma" (or the lack thereof). My point is that it's not a product of one's effort, and is, in fact, so out of one's hands that its read can change depending on the audience.

I disagree that this somehow disqualifies their marginalization that they started with. They may have had another characteristics about their lives that affected that marginalization in unexpected ways. For instance, before Kim Kardashian was the "western beauty standard" she was effectively a nobody who did a pornography film with an R&B artist. Generally we regard sex workers as marginalized by default and yet the way she maneuvered everything made it like rocket fuel to her career. Had she messed that up we'd be talking about her more like Paris Hilton, who had vastly different outcomes. Brian Kolfage was similar; the man has to travel in a wheel chair and has a prosthetic hand most of the time, so I heavily disagree that he's relatable to any degree. You may have a point about Holmes and SBF, but I rather doubt many of the people who did business with them knew their parents. That's to say, I think you can find an abundance of reasons to eschew someones marginalization once they're successful. That's what intersectionality tries to address, and your reply seems to be the antithesis to intersectionality.

>a woman

Not going to comment on the other cohorts, but at least there's a good representation for this one in Elizabeth Holmes.

appearance isn't independent from charisma.

No doubt he’s a great hype man. If an adult had steered the company and let him be the megaphone, perhaps the story of WeWork would be different! Or maybe it was always flawed lol we’ll never know I guess.

Masters of Bullshit... - https://www.cnbc.com/video/2019/01/14/watch-cnbcs-full-inter...

This is all imo, but in a company you have three interests that are important:

- The company

- The employees

- The shareholders

We currently only recognize two of those things. The board has duties to care, obedience, and loyalty which somewhat represents the interests of share holders but also somewhat represents the interests of the business, which also somewhat represents their own interests. The CEO has self-interest in the form of performance compensation, preservation of the business, and obedience is highly debatable as CEOs are very rarely held to any degree of accountability. Instead the company absorbs the bad actions of the CEO while the CEO inherits all of the reward.

That's a long way of saying, we should restructure the interest groups that have an equal say in running a modern publicly held business. A caveat being that none of those bodies should be a single person or have beyond two overlapping interests.

CEO’s that rely on big consulting orgs to define strategy generally flounder. That’s because they don’t understand what product they plan to put out and have engineering chops to set the right direction. Yeah - Musk said this but most people in the engineering world knew it long before he articulated it publicly. Granted that’s most ceo in the US today. But it provides an indication of how ineffective corporate America is at making fundamental advances.

> […] and I've met mostly CEOs who exploit those people and the value they create for their own personal gain.

And also turn once-great companies into basket cases:

* https://www.penguinrandomhouse.com/books/646497/flying-blind...

Damn the poor VPs, if only they could unionize.

Perhaps I've been more fortunate in my employment, but the majority of CEOs I've worked with are great leaders and materially contribute to the company's success (2%+)

> I've met any number of VPs, COOs, CFOs, etc. that are extraordinary leaders and I've met mostly CEOs who exploit those people and the value they create for their own personal gain.

You just don't understand the genius required to come up with the idea of putting radio on the internet. These people are visionary thought leaders /s

cough Ginni Rometty cough

Absolute joke of a CEO. Drove IBM to the ground during her tenure [0], gets $20M [1] for her service. What an absolute disaster to watch.

A quote from [1]:

> Rometty has previously attracted criticism over executive compensation bonuses, espicially amid all the staff layoffs, outsourcing and revenue decline that IBM has experienced over the years.

> Indeed, under her leadership IBM posted over 24 consecutive quarters of revenue decline.

[0] https://www.cnbc.com/2020/01/31/ibm-was-worst-performing-lar...

[1] https://www.silicon.co.uk/workspace/ibm-ginni-rometty-20m-33...

This one is particularly interesting to me because there have been positive books written about her, and she gives interviews about he management approach where she says pretty standard stuff. Why would anyone buy those books or want to interview her given her results? Other than to hear about what not to do I guess.

Is the counterfactual that it would have been worse without her? Seems somewhat dubious.

The counterfactual is that when you're a high profile person, there's always going to be good AND bad stuff written about you simultaneously.

And it's almost impossible for an outsider, or even people who don't deal with the CEO directly in their day to day (so VPs and up), to know how much the written article resembles the truth.

That pales compared to another "successful" CEO: "Dissecting Marissa Mayer’s $900,000-a-Week Yahoo Paycheck" - https://archive.ph/Q09Bd

I’m not a fan of rometty or ibm by any stretch, but maybe the correct perspective is that she did the least worst job possible (from the perspective of the share holders).

What I mean is, I doubt that anyone alive could have turned the ship around wholly. Maybe her job was just to squeeze as much milk out of the cow as possible while ibm slowly fades away.

You're implying that IBM cannot be saved, yet the ship seems to be slowly turning now, isn't it?

As a former CEO, nothing disgusts me more than executives taking massive payouts during a layoff. Sickening, psychopath behavior that in any just society would leave you forever ostracized.

> One theory is that such CEOs are overpaid because they have too much influence over the board that should be monitoring them on shareholders’ behalf and too much influence over the committee that sets their pay. Thus, CEOs are effectively able to set their own pay and distort their compensation contract.

Just a small amount of research unveils that many boards are comprised of people from a small and exclusive club. Why would one of these club members ever rock the boat?

As an obvious example, can Tesla shareholders really say with confidence that the board can objectively evaluate Elon?

The way I think it's helpful to think about it is "CEOs have the best damn union on the planet".

That is, CEOs and boards basically conspire to keep executive pay astronomically high. I mean, I can understand "bidding wars" for the best of the best CEOs, but I'd think tons of potentially really capable CEOs would work for, say, 10 million instead of 30 million annually. But boards continue to insist on "paying above the mean", and it's not hard to see where that ends up.

Unions get their power through member solidarity. CEOs essentially get their power the same way, with members of "The Club" all ensuring they won't be undercut on salary.

Don't the company's owners control who is on the board?

Depends. As a specific counter-example: a lot of (USA) non-profits have self-perpetuating boards. The CEO and the Board go out and recruit new members of the Board. While the Board has a legal fiduciary duty to the company (non-profits are companies!), it can get pretty murky pretty fast.

For publicly held companies (and some credit unions and similar structured organizations), sure, the Board is "elected" by the shareholders. But this isn't an election like you're used to, and the Board recommends who should be elected to the Board and those people generally are elected.

Privately held companies can have a Board that's chosen by the owners, some even have Boards appointed by the CEO, or the CEO can have a controlling interest in the company. It takes a pretty big breach for you to remove a CEO who appointed you to the Board.

Exactly. Once you break into that club, you're golden. You're CEO at one company, you're on the board of 10 others, you're all one big incestuous mess.

I mean, if they didn't have such political and economic sway, I'd be fine with it. One would hope meritocracy and fundamental economics as they relate to competency would apply but its just a whole other fucking planet these psychos inhabit

It truly is an entirely different planet. I've worked very hard, been fortunate in life to come up middle class, etc... And I've accomplished a lot to be where I'm at in an SVP role at a fortune 50. That said, I'm clearly approaching or at a ceiling. The "alumn club" above me is made up of sons of Ivy somebody, frat bro of Ivy somebody and so on. They hire their own, protect their own and care little about real world results. They exist to protect their in group and enrich each other. I truly do not think meritocracy exists at all above a certain level, it's way more old world bloodline type stuff.

Didn't mean to throw shade at the more reasonable among your ilk ;)

You might find comfort in the fact that karma always comes around eventually and more money blatantly does not equal more happiness. I doubt Mr. Musk is happier than me, in fact, I would argue the reverse is true to the extent I literally feel sorry for the guy, not that I excuse or rationalize his general shittiness in who he is fundamentally and how he (mis)behaves constantly.

That's not even taking into account the likelihood they run into some intractable issues with the law, which is delayed and sometimes denied but never totally withoht significant downside at any time. As they say, "Give me liberty or give me death" and also "the police only need to get lucky once, the crimer has to get lucky over the career of their continuous criming".

Smile friend, you've done well for yourself and remained grounded. There's people far less accomplished I know who failed miserably in that department.

I feel very surreal in having someone at your level honoring me with your recognition and engaging in this dialogue with me. Not use to anybody actually ever listening to me but its getting better, I'm noticing.

It's the new peerage system.

Once you're made a peer of the realm, you are not longer in the group of commoners.

Yeah exactly. There's this widespread fiction that CEO pay is the natural result of intense free market pressure. In reality, these decisions are largely made by a fairly small group of people with highly interconnected relationships and business interests.

> can Tesla shareholders really say with confidence

Well, 13% of shareholders are Elon himself

Surely Elon's brother is diligently looking out for the best interests of the average shareholder...

I always found it interesting that the Norwegian pension fund, which has $1.47 trillion AUM, paid its CEO approximately $650k in salary. No management fee, no "beat the market" bonuses, just a regular salary.

Now, some will say that he, the CEO, is already independently wealthy (having owned a hedge fund and being worth around $700m) and just took the job for the prestige, but it's been the same with the previous directors - only they weren't loaded.

Others will also argue that, hey, it's just a pension fund - their goal is not to innovate, or beat competitors, they just manage the money in a way that keeps up with the market, and mainly manage risk.

$650k a year is what, VP salary in some no-name hedge fund or private equity firm? Small business CEOs are making more than that.

But some people are taking that job, and doing it just as well as their competitors at fund with 0.01% of the AUM, but at 1%-0.1% of the salary.

Whether they are being paid 0.000044% ($650k) of AUM or 0.0044% of AUM ($65m) doesn't really seem like it would make much of a difference to the fund's performance. If it is possible to get better performance by paying more, it seems like this would be a good idea.

In Norway's case, the pension fund is a really huge deal for the country, and managing it is probably like being a high level politician in some ways. You are probably present at all the most important events, and regularly having dinner with the president. They could probably easily pay $0. I don't think you can extrapolate this out to others.

> If it is possible to get better performance by paying more, it seems like this would be a good idea.

That is a pretty big "if". And also it seems to me, that if shareholders have only one button to influence anything in their corporation, they tend to turn it to "high", even if there is no cause-effect relationship to high performance.

But how do you know that someone will be an above average manager, relative to others with a similar track record, pedigree, firm handshake or whatever? Of course the answer is that we don't know, it's spending tens of millions of dollars for a chance at getting an above average leader, and maybe ending up with a below average one instead.

Raising the management cost by a few thousands of a percent of AUM for a few percent chance of having a few percent better yield seems like it might make sense

> $650k a year is what, VP salary in some no-name hedge fund or private equity firm? Small business CEOs are making more than that.

$650k is sub-exec management in much of corporate America now. Especially in tech.

Europe has a different cultural range around employee compensation. I haven't been able to determine why that is the case.

>Europe has a different cultural range around employee compensation. I haven't been able to determine why that is the case.

Primarily because they value a hundred different things way higher than "Make all the money in the world" on their list of priorities.

That would make some kind of sense except they do in fact have very profitable companies in Europe. The question is more around why do employees of a company like Goldman Sachs earn less in Europe than they do in America for the same work.

(Setting aside the European colonial history that could be summarized as "taking all the money from the world.")

>That would make some kind of sense except they do in fact have very profitable companies in Europe.

What GP suggested they value doesn't preclude this. Not valuing making all the money in the world for yourself personally doesn't also mean you believe "eh, just run the company into the ground, it doesn't matter."

>Setting aside the European colonial history that could be summarized as "taking all the money from the world."

1. Widespread cultural attitudes change all the time. 2. This was not driven by the populace as a whole, it was driven by the very wealthy.

CEO pay always grew inline with worker's pay until 1978 when trend started to break. Coincidentally, 1978 is when 401K was introduced.

https://www.epi.org/publication/ceo-pay-in-2021/

Then in 1990s, all hell broke loose and the gap completely blew open between avg worker and CEO pay.

Almost relevant: https://wtfhappenedin1971.com/

A lot of attention is given to CEO salary, but I see it as an indicator of more general largesse among management class. You have a massive class of dubious upper management pulling massive salaries. Also massive, nebulous marketing budgets. And a huge increase in real estate costs (rent).

All of which act as a massive tax on consumers.

People talk about inflation in the abstract but never consider where those additional costs are going. Increased rents, management comp, marketing are all huge costs that reflect in pricing.

I’m not prescribing government oversight on costs – actually the inverse. I think the debasing of currency allows for “legitimate” corruption like this.

Until someone approaches this as a class issue rather than an economic one, it will never be recognized or addressed.

> When CEOs Are Paid for Bad Performance

That's good news for Mitchell Baker (Mozilla CEO) who receives millions while Firefox usage has been dropping for years and has recently hit a new low (https://data.firefox.com/dashboard/user-activity).

> In 2018 she received a total of $2,458,350 in compensation from Mozilla, which represents a 400% payrise since 2008.[14] On the same period, Firefox marketshare was down 85%. When asked about her salary she stated "I learned that my pay was about an 80% discount to market. Meaning that competitive roles elsewhere were paying about 5 times as much. That's too big a discount to ask people and their families to commit to."

Yes, Ms. Baker, how can anyone support themselves and their family for a measly $2,458,350 a year?

> "I learned that my pay was about an 80% discount to market. Meaning that competitive roles elsewhere were paying about 5 times as much."

This is a fascinating statement, and shows a (willful?) misunderstanding on her part: the pool of people who could do her job at a replacement level is not "other CEO's"--it's a much larger group, including, I'm sure, a great number of people who work for her own company for much less than the CEO's salary. The fact that other CEO's are paid more than this is precisely the problem, and evidence that the role allows CEO's to abuse their power to get paid disproportionately more.

Gosh, if she is being underpaid so badly maybe she should quit and move to one of those > $10m positions instead?

That said, while it is extremely rare to find a CEO that truly inspires (ala Steve Jobs), there are a lot of CEOs that can really tank a company. So many only want to siphon money as fast as possible before bailing out, so there is a danger in hiring a cut rate CEO.

You get offers for roles at 5x your pay. You tell your boss and she says "Fine I'll match it." (Assume for the sake of argument you are not lying. Further please ignore the fact that your boss might be foolish to make that offer, that may be true but it's beside the point I'm making here.)

Now go home and tell your spouse and children that "I could earn a salary five times higher than what I am currently making, but I've chosen not to."

This comparison is kind of moot when you are CEO, your main product has dwindling market share, and your company is laying off hundreds of employees while your salary continues to double every 3 years.

I think you miss my point.

I try to earn a competitive salary, as I’m sure you do. Why shouldn’t she? You, she or I may be bad at our jobs. That makes our employers foolish - it doesn’t make you, she or me bad people for trying to make a lot of money.

> Why shouldn’t she?

Maybe I'm still missing your point, but isn't the writing on the wall here? She's at the top of the hierarchy and her poor decisions negatively affect everyone at the company. Why shouldn't she? Because the company is already bleeding money and employees.

When Nintendo saw a financial downturn between 2011 and 2014, their CEO voluntarily halved his salary for two years. Why should he do that? Maybe because it shows responsibility and expresses solidarity with the rest of his workers.

EDIT: spelling

That name immediately came to mind upon reading the title as well.

The CEO who presided over the fall of Yahoo received $40 million in compensation.

I'm advertising here that my fee for doing the same job is only half that amount.

False.

Marissa Mayer left Yahoo with over $260 million in compensation.

I stand corrected. My offer still stands.

Overseeing fall of a company, huh? Hell, I can do it for free. I'll just network, see where C-suite lands, and ask for favours later while paying out significant C-suite compensation bonuses.

"only half" of 40 million.

"First, the researchers defined a way to measure CEO skill." Very difficult.

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

Was he good for GE or the beginning of the end?

Good in the short term. He spun off unprofitable parts of the company. He streamlined the core business.

Bad in the long term. He didn't believe in unprofitable orgs. GE did not develop new technology and fell behind the times.

" He spun off unprofitable parts of the company."

He also spun off "unproductive" parts of the workforce. Take this as a word of caution: https://en.wikipedia.org/wiki/Super-chicken_model

I love the part about "Stack ranking can encourage antisocial behavior, and have deleterious effects upon group outcomes, citing Microsoft, Enron, and Amazon's experience.[10]" when MSFT and Amazon definitely did not stop doing that at all.

I would argue that the primary job of a CEO is to provide the core strategy to the company. One can count on the rest of the C-suite and middle management to care about quarterly profits, that is their job. It is the role of the CEO to override those short term gains when they are in conflict with the long term vision. CEOs that only focus on the next quarter tend to run their companies into the ground. The CEO should always be thinking about next year and the next decade.

I made a comment about this the other day: Many of the world's biggest companies operate like a royal dynasty. Leadership/board positions are inherited by family members, or given to close friends.

I have no hard data, but I would wager that it is more common that nepotism plays a role than not.

Nokia CEO Elop turned out to have a $20M bonus in the case of a sale of the company. He really drove the company to the ground and made it a headless chicken for Microsoft during his tenure.

Ctrl+f "Elop", knew he's already mentioned. There exists some weirdest demography and social network among whom the CEOs are recruited from. They receive tens of millions as effortlessly as low level employees don't receive basic pay rises neither bonuses. They just exist and show up.

And of course boards justify the fully promised natures of such bonuses as being the only way to get a failing CEO to give up his/her big title and pay in the interests of doing what's right for shareholders.

Nice hustle if you can find it.

I think an underexplored reason for high CEO pay is outright corruption.

We don't really question why a Russian oligarch is a billionaire. It's not business skill, it's using their authority to enrich themselves directly: corruption.

In the USA we don't think of ourselves as having such brazenly corrupt oligarchs, and yet the people in analogous positions are making similar outrageous amounts of money. Some of them have been caught in outright fraud and corruption, e.g. Trump. More of them are probably outright corrupt, and have not been caught yet. But also, even the ones who are not corrupt - their positions give them the ability to earn money by corruption, so perhaps the wage has to be competitive so that they won't be tempted.

If I'm directly controlling $1 billion of purchase orders, and making a salary of $500,000 a year, I'm going to have a pretty strong incentive to send $100 million of that to a buddy for a 5% kickback. If I'm making $40 million a year, eh why risk it.

From the article: "One theory is that such CEOs are overpaid because they have too much influence over the board that should be monitoring them on shareholders’ behalf and too much influence over the committee that sets their pay."

I think sometimes they are paid to do what from outside looks like bad s** on purpose. Like transitioning a company from public to private or other weird things like that.

You need someone that can put their face, that "shows up" even if it's kind of obvious where it will lead to - the article calls this "constraints".

Imagine being hired exactly with the purpose of doing a bad job that nobody wants to do. You need to offer an incentive for doing such a thing.

Or it's just sheer incompetence. I just can't believe that someone can get paid 20 millions or so for crushing a company.

All too often CEO pay is divorced from performance leading to bad CEOs being ridiculously overpaid. Also, having a good CEO can generate multiples of their compensation in value for the company. Both things can be true simultaneously. Therefore, it is more helpful to consider the performance of the company (relative to the industry) to judge whether a CEO is delivering rather than just the sticker price of their compensation.

It's good to be king.

Even if only foraday.

"Only" for a day; Jeff Bezos makes $8 million per hour. $150 thousand per minute.

https://www.businessinsider.com/what-amazon-ceo-jeff-bezos-m...

>We calculated the Amazon CEO's annual earnings by finding the difference between his 2017 and 2018 net worths

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