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Comment by Workaccount2 | Hacker News Reader

The media would probably lose 20% of their revenue if people learned that CEO's with those monster pay packages get paid out of shareholders pockets, whereas workers get paid out of company pockets.

To put it plainly - not paying the CEO wouldn't free up any meaningful amount of more money to pay the workers.

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I'm sure the workers would be happy to take substantial raises in the form of equity.

Probably not, since you can't pay rent or buy groceries with shares. If the company is private this is even more of a headache as you may not see any money for years and the actual value wouldn't be firm until the sale is finalized.

If the company is public...you can just buy shares like anyone else (well depending on your position you might need approval).

Equity isn't a magical thing that prints millions. There are ample people on this forum that could tell you endless stories about "equity" and "getting rich"...

> Probably not, since you can't pay rent or buy groceries with shares. If the company is private this is even more of a headache as you may not see any money for years and the actual value wouldn't be firm until the sale is finalized.

Equity in a privately held company is certainly more complicated to deal with, but if -- as per my original post -- you offer someone a substantial raise in the form of equity I'm quite certain they won't turn it down.

> If the company is public...you can just buy shares like anyone else (well depending on your position you might need approval).

I can't help but suspect you are ignoring the substantial raise part of my post at this point, as otherwise this comment seems like a non-sequitur.

> Equity isn't a magical thing that prints millions. There are ample people on this forum that could tell you endless stories about "equity" and "getting rich"...

This is condescending and not conducive to a polite discussion. I did not ask for and do not need an explanation of equity compensation.

>you offer someone a substantial raise in the form of equity I'm quite certain they won't turn it down.

Of course not. If I walked up to you at the roulette table and said "I'll put $100 on red and if I win, you keep the winnings, If I lose, my loss". No one would turn that down. However no one would make that offer either, including you.

Perhaps you are confused or misspoke, but equity is given in lieu of full monetary compensation, not given on top of full monetary compensation. Shareholders aren't a charity standing at the roulette table. Offer people to exchange 20% of their current compensation for equity, and suddenly you get a lot more cold feet.

Perhaps you didn't read the comment you were responding to[0]:

> I'm sure the workers would be happy to take substantial raises in the form of equity.

Let me explain it to you as clearly as possible. You claimed that reducing CEO compensation would not result in more money for workers because the majority of CEO compensation is in equity[1]:

> To put it plainly - not paying the CEO wouldn't free up any meaningful amount of more money to pay the workers.

I then attempted to point out that if the company were to redistribute some or all of that equity to workers, they certainly would not turn it down.

Here is a simple example with nice, round numbers: Imagine a company in which the CEO's compensation package is $1m/yr cash and $10m/yr equity at current valuation, and there are 100 workers with a compensation package of $100k/yr cash and $0/yr equity. If you take $5m/yr in equity from the CEO's compensation and distribute it equally among the workers, you now have a company in which the CEO makes $1m/yr cash plus $5m/yr equity, and the workers make $100k/yr cash and $50k/yr equity. See? You can, in fact, reduce CEO pay to increase worker pay! Of course, we both know that money and equity are not interchangeable, which is why I justified my comment by pointing out that the workers would -- presumably -- not reject a compensation increase in the form of equity.

Clear?

[0]: https://news.ycombinator.com/item?id=44663106

[1]: https://news.ycombinator.com/item?id=44663077

Workers are paid out of shareholder pockets. Every dollar spent on worker salaries is a dollar not spent on dividends or stock buybacks. This isn't a useful distinction to make.

Sure, from the standpoint that the entire business is an investment owned by shareholders that's true. But it's not really helpful in any financial way to frame it like that. The entire business could be liquidated and paid out in a dividend if that's all shareholders wanted.

The company issues new shares to the CEO, it could just as well issue new shares to workers, issue new shares and sell them to the workers.

And where is that money shareholders give to CEOs coming from?

I'll one up your tautology: not paying shareholders would free up meaningful amounts of money to pay the workers.

Why does it matter?

Even if that were true, they should still get less on principle. Making the elite richer gives them even more power that they don't need.

On what principle? Why should anyone be barred from negotiating the best deal they can get in a fair exchange?

The keyword is fair. The have the power to influence the government through bribes so it's never fair. And they can use their wealth to take advantage of the commons as well. They should be sent to prison, the majority of them.

All that matters here is that the CEO and company are negotiating without one side being able to apply some sort of external pressure to force the other to capitulate to their demands.

Unless of course you're claiming that CEOs are bribing "the government" to force companies to increase their pay, which would be quite the theory.

So again, what is the principle that says CEOs should be paid less than a company is willing to pay them to work in that role? Should all workers decline to maximize their compensation, or just those you deem to have too much money? If the latter, what is the threshold?

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