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Comment by icehawk219 | Hacker News Reader

The book Predictably Irrational[0] has a good section on how making the salaries of CEO's of publicly traded companies public information is one of the things that has helped lead to their salaries spiking so incredibly in recent years. It's been some time since I read the book but if I remember correctly the argument is that making them public basically removes any social embarrassment or taboo around having extravagant salaries. If sharing salary info becomes more commonplace in other areas I wonder if you'd see the same thing or the exact opposite.

[0] https://www.amazon.com/dp/0061353248

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You're right that making the CEOs of publicly traded companies helped cause them to increase (among other reasons), but wrong about the mechanism.

What actually happened was the following. Suppose you're on the Compensation Committee of a board of a publicly traded company. You're deciding the CEOs salary. How do you do this? Simple, you take a look at the other public companies that are comparable (revenue, market cap, sector, etc). You get an average.

Now you don't want pay your CEO the average rate, do you? After all, he's clearly above average. So you choose a rate that's say, 75% percentile.

But this algorithm plays out iteratively. Each iteration, compensation for CEOs go up as every company tries to pay above average.

I haven't read that book, but isn't increased negotiating power for CEOs a more likely explanation than social embarrassment? If I've been chosen as the lead candidate for a CEO, it's a lot easier to justify a large salary if I can point at our competitors and say that I should be paid competitively to their CEOs.

It is more of a creeping process. Since no boards think their CEO is below average (if they did they would fire him/her). If their CEO is above average then the compensation they feel their CEO is due should also be above average. If everyone starts doing this then the average CEO salary will keep rising and rising. We end up in a world where all the CEO’s are above average and their salaries are in the stratosphere.

The fact that board members are also themselves either executives in the same or other firms, or likely to be employed as such in the future, means that board members also have a self-interest in the trend of rising executive salaries.

Well there is this effect as well, but the "above average CEO, above average pay” is much easier to defend at the annual stockholders meeting.

Governmental or state university-employed developers (as well as all other employees) have long had their salaries a matter of public record. Their salaries generally are lower than private sector though total compensation including paid time off (often 6-8 weeks/yr) must be considered.

Yeah, when I worked for 5 years as a developer in municipal government, I may have had less total take home pay than some of my peers, but my "hourly rate" was easily comparable. I had 5 weeks of vacation a year to start, and worked 35 hours a week, every week.

When I left, it wasn't because of the money.

Engineering salaries spiking wildly sounds like a net positive for engineers.

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