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Comment by Pet_Ant | Hacker News Reader

That seems like a bad incentive. If someone had a debt to the IRS or a bad divorce and needed the extra money, do you want them to start taking moonshoots with their companies? You want them to do right by their companies not themselves.

Already with performance based compensation you have the problem with rewarding executives with the general market as opposed to their own performance. I mean, potentially Jensen Huang is terrible at his job and Nvidia is only making half of the money it should but the AI boom is covering for it.

100% performance means no one would man the ship of a failing company trying to correct the course.

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> If someone had a debt to the IRS or a bad divorce and needed the extra money, do you want them to start taking moonshoots with their companies?

Yes? We need more moonshots.

> I mean, potentially Jensen Huang is terrible at his job and Nvidia is only making half of the money it should but the AI boom is covering for it.

Why exactly do you think NVIDIA was well positioned for the AI boom? Jensen Huang saw it coming long before anyone else did, and oriented his company to be perfectly positioned.

You’ve got causality entirely backwards here.

Jensen is an arbitrary example. I'm asking how do you disentangle company performance from internal and external factors.

If you had a company that was making buggy whips at the invention of the automobile, you expect the company profits to go down at no fault of the CEO. A better CEO just changes the slope not the direction.

So what you want to do is not reward based on performance of the company, but on the CEO and to do that you need to figure out the "wins above replacement" [1]. How much better did the CEO do than any schmuck chosen at random.

[1] https://en.wikipedia.org/wiki/Wins_above_replacement

What investors want is a CEO that returns more shareholder value, full stop. I fail to see an argument here for why the Tesla pay package doesn’t meet that criteria.

It’s essentially like a stock picker who only takes their fee from how much better their fund does vs the S&P 500.

> a stock picker who only takes their fee from how much better their fund does vs the S&P 500.

What funds have that fee structure? Genuine question: I hadn't heard of any, but it intuitively seems "fairer" than the conventional two and twenty.

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