I feel like it's a little disingenuous to list unexercised stock and option grants as part of the overall compensation, since these are directly related to the future performance of the company itself (as led by the listed CEO, presumably). I would have liked to see the option to differentiate between total compensation more granularly, including by exercised grants.
I understand that that "2.3 billion" number makes for shocking value and therefore a great headline, supporting the narrative that they're looking to construct, but the way the raw data is presented actively obfuscates readers from exploring the data and forming their own interpretations.
When I see a dataset with a 4 million percent increase YOY, I would probably classify that as an outlier, not as the representative value I report for the whole dataset.
Edit: That's not to say their narrative is wrong (that is, CEOs may absolutely be overpaid), just that the way they presented it feels misleading to me.
On a similar note, I bring thing this kind of thing up whenever people talk about how much money Jeff Bezos has.
While Bezos has a lot of cash for sure, he doesn't have $160B like news headlines make it out to be. Most of his "money" is tied up in stocks, and if he were to try to cash out all of it, it would tank the stock prices pretty hard, and he'd only get a fraction of it.
No one is saying Bezos has $160B in cash. At that level liquid cash doesn't really matter anyways, since there's no way you could even spend that much.
What he does have, though, is $160B worth of influence, a large part of which comes from the money tied up in stocks.
The difference here is realized vs. realizable pay: http://www.execcomp.org/Issues/Issue/pay-for-performance/rea.... The realizable number is more often used when comparing to peer companies. The reason is not generally to get larger numbers for headlines. But indeed, as you say: "One drawback of realizable pay is that because it combines actual pay with a current snapshot of future incentive pay, it may differ significantly from the comparison of pay actually received at the end of the performance period to the performance over that period."
CEOs should be able to get paid how much ever the company/the board/the stock holders are ok with paying them. No limit.
BUT that pay should be linked to the pay of everyone else in the company: the average pay or the minimum pay or whatever have you.
I think the point gets lost in the fairness. It’s fair to pay them more for their hard work. But it’s not fair to pay the CEO enormous sums while the employees struggle.
I've seen a lot of talk about hard limits online recently, I don't like it. A very high tax rate for the extremely rich I am much more OK with.
75 to 95 percent of income above 10 million seems fine. I wouldn't even tax stock holding. Let people sell 10 million in stock each year and avoid the high tax, nobody will struggle on 10 million a year. And if their money is still growing like crazy in the stock market, fine, tax it when it comes out.
I have literally read of a conversation between the wives of two high income individuals, where one said, "The thing about 40 [million dollars a year income] is that, after taxes, it's only 20".
Sure, nobody will struggle on 10 million a year. They won't go hungry. They won't have to worry about an unexpected car repair bill. But they will struggle to live the lifestyle that they've come to expect to be able to live. That will feel like struggling to them. And they will complain bitterly about having to struggle, and the rest of us will mock them for it, and say "You have no idea what struggling is."
This has a kind of weird, not necessarily bad effect. Since the main way this changes the CEOs life is their relationship to capital.
With income "caps," you no longer own a private jet, but you still fly on one.
The company hires your chauffeur, owns your vacation home, owns your private jet, hires your personal assistant, hires your other, more personal assistant, pays for your chef and maid, etc.
CEOs still live a life of luxury, but they are unable to acquire massive capital. If software engineers are labor aristocrats, CEOs become labor space emperors.
It definitely is more of an "east-coast" style of wealth, the kind of thing that shocked the "Traitorus Eight" when they were working with east coast finance to found Fairchild (if I'm remembering my history correctly.) But high marginal tax rates on the super rich were in effect at that time and they didn't understand the alternative either.
This is a "sounds good but is actually terrible" idea.
Outsourcing would skyrocket and millions of low paying jobs would be lost and sent abroad and to sub-contractors because you've just created a strong incentive for the CEO to fire the lowest-paid workers in their company.
all jobs including outsourced ones should be pegged. It should be something like you're allowed to earn 200x the average worker including bonuses, including outsourced employees, contractors, freelancers both foreign and domestic.
Maybe also have a bonus structure that's add/subtract 10% to that # for jobs created/lost, so if you added 1% (USA based) increase in jobs you can get a 10% bonus, so if you earned 10 million, you can get 11 million. If your company had to lay off 1% (USA based) of workforce, then you have to take 10% less as a penalty. The idea is to encourage a healthy economy locally in America, while keeping wages up across the board.
Then there are only 2 ways for the CEO to rise above current pay: 1. raise wages. 2. hire more people. Both of which stimulate the economy.
Why should it be tied to other employees’ compensation? Fairness and capitalism-based business generally don’t go together. That kind of thinking leads to all kinds of problems. For example, is it fair for an employee to jump ship for a higher salary offer elsewhere and leave their coworkers to pick up the pieces? Is it fair for some employees to make more than others just because they're better at negotiating? Is it fair that software engineers make several times as much as teachers just because the thing they're good at happens to be in high demand right now? I would say no.
Isn’t that the mantra? Yoi are assuming that once you leave, the company doesn’t hire your replacement. You are supposed to leave your first few employments if you want to make big gains in your salary and not be stuck with the annual set amount of raise? Hell, I did that and doubled my income. The last work hired someone else and paid them what I got paid.
Tying the CEO salary to employee compensation wouldn’t change that. CEOs get raises because the company is doing better. Isn’t the company doing better because the employees are doing better work? So why does just the CEO get paid more? Who not the employees with him?
> Why should it be tied to other employees’ compensation?
Because the employer cannot exist without his employees, and if the employer is getting billions while the employees are only getting thousands, then those employees are certainly getting undercharged.
It's a way to force wages to scale to productivity and value, something that (if you have not remained ignorant of the current political dialogue), has been shown again and again to not be happening anymore.
Not just that but, why should the employer make more? What added value does the CEO bring that other people cannot already do? Most CEOs can be replaced without employees, consumers, and shareholders noticing. The 'personnel value' that a CEO brings is clearly very marginal in most businesses, as opposed to bringing in more engineers or HR workers or temps. And the CEO's salary can pay for a lot more of those.
> Is it fair that software engineers make several times as much as teachers just because the thing they're good at happens to be in high demand right now? I would say no.
I disagree. Nobody forced anyone to be a teacher: people have chosen that job knowing full well they’d make less money than an engineer. People aren’t assigned careers like they were in a the Soviet Union: they pick what they want to do. I used to be a photojournalist. The pay sucked so I ended up doing software. Nothing is stopping a teacher from making similar choices. People complain about the pay, but they keep joining lower paid professions. It’s supply and demand.
> Why should it be tied to other employees’ compensation?
If a company is doing exceeding well, why should only the CEO see the benefit, and not the people doing the grunt work of actually building the products that lead to the company's success?
> Fairness and capitalism-based business generally don’t go together.
They don't, but they can.
> That kind of thinking leads to all kinds of problems. For example, is it fair for an employee to jump ship for a higher salary offer elsewhere and leave their coworkers to pick up the pieces? I would say no.
I would say yes. People jump to new jobs for a higher salary all the time.
Equality of outcome is a dark place to go. Every single time it has been attempted it has resulted in mass death. Is capitalism fair? Maybe not, but you'll see less body bags than the alternatives.
If it's never been easier to be a CEO, perhaps the author should consider it. It's the easiest job title to legitimately acquire. You just need to pay a few hundred bucks to incorporate in Delaware, and boom, you're a CEO.
I detected a note of sarcasm in your response, but I don't have sufficient context to decipher its meaning myself. Given that you were a founder for two YC companies as it says in your HN profile, could you please explain what you are implying?
I skimmed the article: it gives pretty good details on the arguments that it is trying to make. The one thing I would change would be the headline to read "It’s Never Been Easier to Be a Fortune 500 / Unicorn C.E.O., and the Pay Keeps Rising" to reflect the specific kind of CEO that the article author talks about.
I'd like to see a little balance in this piece. Author includes no input from the CEOs and no evidence of the ease of the job. It's essentially a listing of the compensation of a variety of high-paid CEOs.
Moreover, the median CEO pay in the US is $160k [0]. Perhaps there's a little confirmation bias in this article.
Before jumping to the conclusion that the author is hoping you jump to, question: is it possible that he, you, and I don’t have a full view of the rare personality traits and skills that are required to be an effective Fortune 50 CEO?
I assume most of us here are in favor for exchanging money for value (versus time contributed)? Correct? Otherwise, how is a $200k SW engineer’s salary justifiable compared to a $30k fast food worker’s? In the same 40 hour work week?
I do take issue with non-founding CEOs [sometimes] having no skin in the game. I saw this when I was at BlackBerry. Win or lose, the CEO that replaced the founders would win. BlackBerry lost, he didn’t. This seems like a misalignment of incentives, but that’s up to the company to address, not me, and hopefully not the government. If the company gets the incentives wrong, they lose, and hopefully we learn.
Back to the point: if a company has an impact on billions of dollars and millions of lives, I’d prefer their leader be paid well. But my preference is irrelevant here because a company can and should decide how to value that person’s role. In contrast, I certainly wouldn’t want a government policy (and it’s guaranteed slew of unintended consequences) regulating how much a chief executive is paid.
Being an effective CEO is anything but easy. And the combination of an effective CEO’s skills and experience are extraordinarily rare. It’s not a surprise that the market prices their value accordingly.
Once you get to a certain level of success in the business world, you can't fail. CEOs who run a business into the ground easily find work leading other companies. CEOs who commit crimes almost never get punished. There's a serious issue with "moral hazard" because they can't fail or be punished.
> Once you get to a certain level of success in the business world, you can't fail. CEOs who run a business into the ground easily find work leading other companies.
There are other paths too, like going on to lead countries.
.. and even if they are punished the fine is usually so small that they can commit the same crime a few hundred times and still won't run out of money.
Because it was already taxed at the same rate as income when it was earned as profit by the company. Taxing it again when its realized means it was taxed once when the corporation earned it, and then again when the individual stock holder realized it. Now you may think that's how it should, but that issue of double taxation is why capital gains tax is less than income tax.
An alternative is to 'flip' the tax. Tax companies at the rate of capital gains, and investors at their tax bracket 'normal' rate. This also leaves more capital for companies to reinvest.
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I understand that that "2.3 billion" number makes for shocking value and therefore a great headline, supporting the narrative that they're looking to construct, but the way the raw data is presented actively obfuscates readers from exploring the data and forming their own interpretations.
When I see a dataset with a 4 million percent increase YOY, I would probably classify that as an outlier, not as the representative value I report for the whole dataset.
Edit: That's not to say their narrative is wrong (that is, CEOs may absolutely be overpaid), just that the way they presented it feels misleading to me.
On a similar note, I bring thing this kind of thing up whenever people talk about how much money Jeff Bezos has.
While Bezos has a lot of cash for sure, he doesn't have $160B like news headlines make it out to be. Most of his "money" is tied up in stocks, and if he were to try to cash out all of it, it would tank the stock prices pretty hard, and he'd only get a fraction of it.
What he does have, though, is $160B worth of influence, a large part of which comes from the money tied up in stocks.
BUT that pay should be linked to the pay of everyone else in the company: the average pay or the minimum pay or whatever have you.
I think the point gets lost in the fairness. It’s fair to pay them more for their hard work. But it’s not fair to pay the CEO enormous sums while the employees struggle.
I've seen a lot of talk about hard limits online recently, I don't like it. A very high tax rate for the extremely rich I am much more OK with.
75 to 95 percent of income above 10 million seems fine. I wouldn't even tax stock holding. Let people sell 10 million in stock each year and avoid the high tax, nobody will struggle on 10 million a year. And if their money is still growing like crazy in the stock market, fine, tax it when it comes out.
Sure, nobody will struggle on 10 million a year. They won't go hungry. They won't have to worry about an unexpected car repair bill. But they will struggle to live the lifestyle that they've come to expect to be able to live. That will feel like struggling to them. And they will complain bitterly about having to struggle, and the rest of us will mock them for it, and say "You have no idea what struggling is."
Let's get rid of the 15% cap on "long term" capital gains first. A dollar earned is a dollar taxed, no matter where it comes from.
With income "caps," you no longer own a private jet, but you still fly on one.
The company hires your chauffeur, owns your vacation home, owns your private jet, hires your personal assistant, hires your other, more personal assistant, pays for your chef and maid, etc.
CEOs still live a life of luxury, but they are unable to acquire massive capital. If software engineers are labor aristocrats, CEOs become labor space emperors.
It definitely is more of an "east-coast" style of wealth, the kind of thing that shocked the "Traitorus Eight" when they were working with east coast finance to found Fairchild (if I'm remembering my history correctly.) But high marginal tax rates on the super rich were in effect at that time and they didn't understand the alternative either.
Outsourcing would skyrocket and millions of low paying jobs would be lost and sent abroad and to sub-contractors because you've just created a strong incentive for the CEO to fire the lowest-paid workers in their company.
Maybe also have a bonus structure that's add/subtract 10% to that # for jobs created/lost, so if you added 1% (USA based) increase in jobs you can get a 10% bonus, so if you earned 10 million, you can get 11 million. If your company had to lay off 1% (USA based) of workforce, then you have to take 10% less as a penalty. The idea is to encourage a healthy economy locally in America, while keeping wages up across the board.
Then there are only 2 ways for the CEO to rise above current pay: 1. raise wages. 2. hire more people. Both of which stimulate the economy.
Because the employer cannot exist without his employees, and if the employer is getting billions while the employees are only getting thousands, then those employees are certainly getting undercharged.
It's a way to force wages to scale to productivity and value, something that (if you have not remained ignorant of the current political dialogue), has been shown again and again to not be happening anymore.
Not just that but, why should the employer make more? What added value does the CEO bring that other people cannot already do? Most CEOs can be replaced without employees, consumers, and shareholders noticing. The 'personnel value' that a CEO brings is clearly very marginal in most businesses, as opposed to bringing in more engineers or HR workers or temps. And the CEO's salary can pay for a lot more of those.
I disagree. Nobody forced anyone to be a teacher: people have chosen that job knowing full well they’d make less money than an engineer. People aren’t assigned careers like they were in a the Soviet Union: they pick what they want to do. I used to be a photojournalist. The pay sucked so I ended up doing software. Nothing is stopping a teacher from making similar choices. People complain about the pay, but they keep joining lower paid professions. It’s supply and demand.
If a company is doing exceeding well, why should only the CEO see the benefit, and not the people doing the grunt work of actually building the products that lead to the company's success?
> Fairness and capitalism-based business generally don’t go together.
They don't, but they can.
> That kind of thinking leads to all kinds of problems. For example, is it fair for an employee to jump ship for a higher salary offer elsewhere and leave their coworkers to pick up the pieces? I would say no.
I would say yes. People jump to new jobs for a higher salary all the time.
I detected a note of sarcasm in your response, but I don't have sufficient context to decipher its meaning myself. Given that you were a founder for two YC companies as it says in your HN profile, could you please explain what you are implying?
I skimmed the article: it gives pretty good details on the arguments that it is trying to make. The one thing I would change would be the headline to read "It’s Never Been Easier to Be a Fortune 500 / Unicorn C.E.O., and the Pay Keeps Rising" to reflect the specific kind of CEO that the article author talks about.
Moreover, the median CEO pay in the US is $160k [0]. Perhaps there's a little confirmation bias in this article.
[0] https://www.payscale.com/research/US/Job=Chief_Executive_Off...
I assume most of us here are in favor for exchanging money for value (versus time contributed)? Correct? Otherwise, how is a $200k SW engineer’s salary justifiable compared to a $30k fast food worker’s? In the same 40 hour work week?
I do take issue with non-founding CEOs [sometimes] having no skin in the game. I saw this when I was at BlackBerry. Win or lose, the CEO that replaced the founders would win. BlackBerry lost, he didn’t. This seems like a misalignment of incentives, but that’s up to the company to address, not me, and hopefully not the government. If the company gets the incentives wrong, they lose, and hopefully we learn.
Back to the point: if a company has an impact on billions of dollars and millions of lives, I’d prefer their leader be paid well. But my preference is irrelevant here because a company can and should decide how to value that person’s role. In contrast, I certainly wouldn’t want a government policy (and it’s guaranteed slew of unintended consequences) regulating how much a chief executive is paid.
Being an effective CEO is anything but easy. And the combination of an effective CEO’s skills and experience are extraordinarily rare. It’s not a surprise that the market prices their value accordingly.
There are other paths too, like going on to lead countries.
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Dead Comment
An alternative is to 'flip' the tax. Tax companies at the rate of capital gains, and investors at their tax bracket 'normal' rate. This also leaves more capital for companies to reinvest.
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