Hilton earnings are crashing, is this a responsibility of the CEO? Did the CEO responsibility increase lately? Don't the workers have any responsibility there as well? Or do they have declining responsibilities?
"Well paid CEO" and "CEO making hundreds of times more than their employees, and increasing their compensation at a time when workers are being laid off, seeing pay freezes and drops, and just straight-up dying of COVID" are....not, shall we say, quite equivalent.
And I am not (at least, not here) attempting to argue that a) they do not do a worthwhile job, or b) they should not be well-paid. Merely that the relationship between their pay and the pay of their employees should not be so drastically out of balance.
The thing is, this applies to all of the non-CEO staff as well. Without them, the company would not stay afloat. If anything, they risked their capital (ie the labor-producing bodies) more than any CEO. And all of this in an economic system where capital risk is ostensibly rewarded.
CEOs make important decisions... acquisions, mergers, layoffs, expanding, shrinking, key partnerships, etc... or entirely changing the direction of the company.
Laborers do important work. Without them the company produces nothing. We could go back and forth with this. And for one reason: it doesn't matter what the CEO does or doesn't do. There is something else that matters much more than any of that.
What happens if a laborer shows up to work drunk, and sexually harasses a colleague and then starts a fight?
What will happen is that they will get fired with no news coverage and no impact to the share price whatsoever.
What happens if a CEO does a fraction of that? It will affect the share price. Share holders will be pissed off. People will protest about it, people will stop buying the products, there will be news coverage and social media coverage about it... It will be a mess that will affect not only the CEO but everyone under them either directly or indirectly. Once the CEO is replaced, the new CEO will bring a new team and that will trigger a reorg... All the stuff above comes with risks and it's possible the new CEO is unsuccessful and has to be replaced again.
And the losses generated by the outing of the crazy CEO will likely affect the laborers too somehow.
As you can see, even if the laborer works hard and contributes to the company, but they do not have the same responsibility as the CEO.
Let's zoom in on what happens when a CEO is replaced. They get a severance package that is more than what I (making 6-figures even) will make in a lifetime. That's what I mean when I'm taking about risks. If I do any of those things, then I'm risking food, housing, and taking care of my kids. If a CEO does it, then he is risking early retirement. That is what makes all the difference.
Sometimes the CEO can do so much harm to a company, that there's no going back. The entire company becomes a failure, and not only the CEO gets a severance package... every employee gets laid off too. And the shareholders lose their money, and the investors lose their investment...
The livelihood of thousands of people can be in the hands of a CEO.
If you have something against hierarchies, that's your problem, man. Hierarchies exist everywhere and have always existed. Larger groups beat smaller groups, and groups need coordination and leadership.
Thanks for the discussion. I'm feeling pretty good that this kind of back and forth didn't devolve the way usual does, but the HN comment section is probably not the right venue to keep going with this. If you do want to continue talking about it, my contact info is in my profile.
If you're a ceo and have 10k employees, and you get them to accept 1k a year less each in wages, you made the shareholders 10m. So it makes sense you get 1m extra. (1k a year for a full time employee is 50c/h roughly, less if you factor in pay linked benefits and other costs).
Hilton has 173k employees. So a ceo who can get minimal amounts more out of them or cut the cost of them even slightly is worth a fortune.
I think this is the real driving force behind the ceo pay numbers we've seen: more big companies where a single ceo or a small top-team have huge leverage.
I'm not making a moral arguement. Just a practical/Economic one. I think "leverage" is a better concept here than "responsibility" (which carries moral implications...)
I'm definitely making a moral argument, because I am a moral person, but for those for whom such arguments hold no sway, I am also making also a practical, economic one: We have ample evidence, from the way things have gone over the past few decades, that increasing inequality in an economic system is bad for the system as a whole.
Yep, and probably preaching to the choir here. That's usually why these conversations tend toward criticizing the systems that encourage these incentives.
The important questions remains: Why is it possible to reduce salaries without losing your workforce? If it's because the economy is shrinking and job supply is dropping, CEO salaries should be less competitive too and share prices should be dropping but we see the contrary.
There's something more than basic market dynamics at play here, inequality is being systematically nurtured which I think is the premise of the article.
If you can fill more orders with fewer employees you go up in value, either as the ceo or the company share price.
Weve been automating away jobs in all sorts of places for decades. Sometimes that's robots. More often its just production method changes. No more need for skilled taxi drivers when you have GPS etc.
That's true, but is it meaningful difference? If all the skilled tasks you do are automated, you're not really a skilled worker anymore are you? So suddenly the ceo can replace you with anyone else and the lower limit on your wages is minimum wage...
Where "well paid" is synonymous with being "commensurately paid", yes, of course. Clearly many people do not believe they are being commensurately paid. The only defense I ever see is pointing at these many people and claiming they simply do not understand how hard being a CEO is, or how much value rests on their decisions. In the face of the overwhelmingly enormous incomes, which continue to become more overwhelmingly enormous, while worker pay growth continues to trickle, halt, or even reverse, the finger-pointing argument seems weak, to put it lightly.
Yes, the primary argument is that without such high CEO pay, companies would perform materially worse due to the consequences of poorer CEO decision making. You seem to be pointing out that the gap between CEO and average employee pay is increasing, which while true, doesn't seem to address the primary argument. In fact, it may be true that, on average, employee pay will decrease by lowering CEO pay (if, in fact, it's true that overall company performance suffers as a result).
It's hard to find supporting evidence for or against the primary argument because you can't split test a CEO, but there are definitely examples of almost identical businesses, where one succeeded and the other failed purely due to execution. And, one can make an argument that the difference in execution is largely due to the CEO. One such example is Blue Apron vs Hello Fresh.
I personally expect in the next 5-10 years to see more pressure from Labor on Capital on the backs of news like this (whether true or spin) and the monetary env we are in.
I read an article in the Guardian today that had a little stat in it that said that the richest 1% in the US own 43% whilst the richest 1% of Greeks only own 9%.[1] I wouldn't have thought that the contrast is SO big between countries. I agree however that the real stats are not as important as how they are spun and represented regarding the influence on public opinion. I also agree that something's (and with that I mean the rich) gotta give sooner rather than later unless growth alone will help everyone up sufficiently (which I don't think it will, especially with climate crisis looming).
[1]https://www.theguardian.com/business/2021/may/11/oecd-higher...
"We find evidence that industry and size adjusted CEO pay is negatively related to future shareholder wealth changes for periods up to five years after sorting on pay. For example, firms that pay their CEOs in the top ten percent of pay earn negative abnormal returns over the next five years of approximately -13%. The effect is stronger for CEOs who receive higher incentive pay relative to their peers. Our results are consistent with high-pay induced CEO overconfidence and investor overreaction towards firms with high paid CEOs."
I'd speculate that without a CEO at all, it would become Lord of the Flies for any of the other executives and the effects of this would ripple into the rest of the company culture, making the company an incredibly toxic place to work.
Not saying that's worse than a CEO who takes enormous profits for his or herself, AND is toxic. Just that there's value in good leadership
I believe CEO pay is the wrong tree to bark up, instead providing a UBI to everyone so they don't need to work, and if people do decide to work then companies will have to compensate everyone competitively vs. other company compensation - and some CEOs may emerge where instead of taking $100million a year, redistribute more of that back into the workforce; this metric can be gamed of course in that compensation can instead be gained in stock.
This is exactly what annoys me the most. Every person is entitled to good healthcare, good education and should be paid a good wage to live well. Happy people don't riot. Happy people don't commit crimes. Happy people don't start wars.
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[ 2.0 ms ] story [ 80.4 ms ] threadIt makes sense to have a well paid CEO in those cases, they have a huge responsibility.
It could have been much worse.
What will happen is that they will get fired with no news coverage and no impact to the share price whatsoever.
What happens if a CEO does a fraction of that? It will affect the share price. Share holders will be pissed off. People will protest about it, people will stop buying the products, there will be news coverage and social media coverage about it... It will be a mess that will affect not only the CEO but everyone under them either directly or indirectly. Once the CEO is replaced, the new CEO will bring a new team and that will trigger a reorg... All the stuff above comes with risks and it's possible the new CEO is unsuccessful and has to be replaced again.
And the losses generated by the outing of the crazy CEO will likely affect the laborers too somehow.
As you can see, even if the laborer works hard and contributes to the company, but they do not have the same responsibility as the CEO.
The livelihood of thousands of people can be in the hands of a CEO.
If you have something against hierarchies, that's your problem, man. Hierarchies exist everywhere and have always existed. Larger groups beat smaller groups, and groups need coordination and leadership.
Hilton has 173k employees. So a ceo who can get minimal amounts more out of them or cut the cost of them even slightly is worth a fortune.
I think this is the real driving force behind the ceo pay numbers we've seen: more big companies where a single ceo or a small top-team have huge leverage.
I'm not making a moral arguement. Just a practical/Economic one. I think "leverage" is a better concept here than "responsibility" (which carries moral implications...)
There's something more than basic market dynamics at play here, inequality is being systematically nurtured which I think is the premise of the article.
If you can fill more orders with fewer employees you go up in value, either as the ceo or the company share price.
Weve been automating away jobs in all sorts of places for decades. Sometimes that's robots. More often its just production method changes. No more need for skilled taxi drivers when you have GPS etc.
They have automated some tasks but not every task.
It's hard to find supporting evidence for or against the primary argument because you can't split test a CEO, but there are definitely examples of almost identical businesses, where one succeeded and the other failed purely due to execution. And, one can make an argument that the difference in execution is largely due to the CEO. One such example is Blue Apron vs Hello Fresh.
https://www.lynalden.com/inflation/#benefit
(which is based on Ray Dalio's Changing World Order): https://www.principles.com/the-changing-world-order/
I personally expect in the next 5-10 years to see more pressure from Labor on Capital on the backs of news like this (whether true or spin) and the monetary env we are in.
https://online.wsj.com/public/resources/documents/CEOperform...
Not saying that's worse than a CEO who takes enormous profits for his or herself, AND is toxic. Just that there's value in good leadership
I’m curious about this, “.. CEO who takes enormous profits..”
Are you implying CEOs are orchestrating their own compensation? Or, are you casually referring to CEO compensation packages?
* People with good wages and education commit crimes less
* People with good wages and education riot less
* People with good wages and education less likely to approve war
Are those assumptions wrong too?