Comment by forgotaccount3 | Hacker News Reader

Comment by forgotaccount3 | Hacker News Reader

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> Top management has insane levels of compensation as a strategy by ownership to alight management's interests with their own, by turning them into owners. If there is going to be a management layer at all, for example the proposed "A-suite", then their compensation will balloon for exactly the same reasons.

That is not correct.

Owner's don't align top management's interests with the owner's interests by giving them 'insane levels of compensation', they do it by giving the managements compensation in the form of shares of the company. It's not the volume of the compensation that aligns their interests, it's the type. Otherwise the 'top management' could just invest in the competitor and torpedo their own company making multiples of the original cash compensation as clients leave for the competitor.

If anything, a high base pay would be a dis-incentive to perform well, because increased wealth (a) reduces the marginal utility of additional compensation, and (b) makes the CEO less vulnerable to going down with the ship. The same goes for "golden parachutes".

IMO, if incentivizing good performance was really the goal, then companies would hire CEOs who are not already wealthy, pay them only enough base salary that they accept the job and can focus on it without worrying about paying bills, and compensate them mainly using illiquid, very long-dated stock options, which become worth a fortune if and only if the company is still around and profitable far into the future. It turns out that this is basically how founders are compensated, and it's a wonder that shareholders allow public-traded companies to be run in any other way.

Sure, if you want to spell it out. It is equity compensation, because they want the management to be owners of the same assets that they hold. Once that's settled though, the question is: how much equity? Well, it needs to be a large number. Owning $500 worth of stock doesn't make them a capitalist -- it just makes them a person with $500 worth of stock.

>' could just invest in the competitor

I mean, the shareholders would most likely sue them out of existence for doing something like that.

Read more Marx?

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