Its 21M, 210M is over 10 years with substantial part of that not vesting until year 8. That said it's still pretty rich given its not tied to shareholder value or business performance.
> That said it's still pretty rich given its not tied to shareholder value or business performance.
The sad truth is that, in recent years, performance doesn't seem to be pegged to compensation anymore.
Not only that, but certain large corporation CEOs do have provisions in their contracts so they get paid handsomely if they are fired, which goes against the very idea of firing people for performance reasons.
I agree that its not a great deal for shareholders, but I can see how we got here.
It works similar in sports, if there is a 33 year old free agent superstar, every team is willing to give them a 2 year 80million dollar deal (40 per year). So the competition becomes who is willing to guarantee 40 for a 3rd, 4th year.
It may not be a great long term decision for the team, but if they dont agree to those unfavorable terms they're simply not getting the player.
I wonder if there were other companies willing to offer similar payment packages to this CEO and the competition become who would guarantee the money without asking for performance goals.
Main difference here is that the average career span of a pro athlete very rarely reaches 20 years, and deal numbers tend to decrease with age. Executives don't have that problem, in fact it's quite the opposite.
Is that actually true? Do these rockstar CEOs get the same compensations when they reach 60? They also start getting those paychecks later in their 30s compared to sport players
> Do these rockstar CEOs get the same compensations when they reach 60?
The average age of a CEO in 2018 is 54 years old [1], so I would say yes, they do. The average salary for a CEO in a top 350 company was $13.9M [2].
> They also start getting those paychecks later in their 30s compared to sport players
Compared to the average NFL player ($860,000) [3], and the average retirement age is 27 years old [4], which essentially means that an average NFL player makes perhaps 5 to 6 million dollars in their whole career. Other more forgiving sports, like NBA, puts players on an average of $8 million [5], and an average retirement age of 28 [6], so around 6-7 seasons.
It's worth remembering that these are highly paid professional athletes who most likely come from college teams, meaning that they weren't paid at all.
A CEO, on the other hand, doesn't spend their previous years as an unpaid intern. They are usually top executives already.
In short, CEOs do get paid better on average than professional athletes, all things considered.
It's really hard to come up with good performance metrics. Ideally, you want execs to make good long term decisions for developing sustainable growth and competitive advantage. To do this, they need some room to maneuver and freedom to operate to make these decisions. Imagine trying to tie dev comp to performance metrics like number of commits or bugs squashed.
If you tie comp to share price or EPS, they'll try to juice it with buybacks.
If you tie it to revenue, they'll try to grow too quickly and become unsustainable. They'll start doing anti-consumer things like denying refunds.
If you tie it to profits, they'll cut the business down to barebones and whittle away at resiliency and R&D in order to squeeze a bit more margin out each quarter.
Like Warren Buffett's co-ceo Charlie Munger once quipped, "show me the incentives and I'll show you the outcome".
> Imagine trying to tie dev comp to performance metrics like number of commits or bugs squashed.
I worked at a company that wanted to do this, and may or may not have behind the scenes.
When I explained that these could easily be gamed, their response was, "Why would someone do that?"
This was at one of the largest banks in the entire world while they were also trying to claim that they were a technology company that happens to do banking. Yeah, okay.
Such a misleading headline, the article even mentions his salary is $175k/year.
> Jassy took over as the CEO of Amazon from Jeff Bezos in July. In 2021, Jassy received $212,701,169 in total compensation, Insider reported in April, citing a proxy filing the company submitted. Only $175,000 of that came from his salary. The rest came from shares: He was awarded 61,000 shares that would vest over 10 years, worth $211,933,520, when he became CEO.
> "The way the SEC rules work we are required to report that grant as total compensation for 2021, when in reality it will vest over the next 10 years," an Amazon spokesperson told Insider in an emailed statement on Friday.
> "What this equates to from an annual compensation perspective is competitive with that of CEOs at other large companies and was approved by the Amazon Board of Directors," the spokesperson added.
Honestly, it's hard to believe that one person who isn't actually producing/outputting anything can create that much value, and that you can't fund someone to do the same work for half the cost.
I'd be curious to see the results of (crowds of?) normal people paid to say what their responses would be in the type of situations that leaders on these pay packages have to deal with, when given similar levels of context.
No doubt that's not the entire job: there's also networking, communication and thought leadership involved. But similar approaches could apply. Liability could be a trickier one.
Of those three, "networking" and "thought leadership" are more hobbies rather than concrete responsibilities of the job.
There are actual concrete responsibilities that a CEO at that level needs to accomplish, a sample of which include:
- fundraising
- organizational structuring
- hiring
- strategic planning + competitive positioning
- go to market motions
- R&D
- investor relations
There's nothing fungible about any of these responsibilities, so no matter how many ordinary people you stack together, you'll never arrive at even a fraction of what a competent executive can do. Companies have executives for the same reasons countries do.
Executives rotate in and out of power subject to the ongoing favor of their stakeholders, but the hierarchical structure of retaining an executive to represent the will of those stakeholders remains in place because there's no efficient way to operate otherwise.
> There's nothing fungible about any of these responsibilities, so no matter how many ordinary people you stack together, you'll never arrive at even a fraction of what a competent executive can do.
I think I'd disagree with that - you state it fairly strongly, but I think that each of the items you mention is possible to delegate and distribute successfully, to varying degrees. Much of that is aided by referring to existing patterns that have succeeded elsewhere.
> Executives rotate in and out of power subject to the ongoing favor of their stakeholders, but the hierarchical structure of retaining an executive to represent the will of those stakeholders remains in place because there's no efficient way to operate otherwise.
That I do find harder to challenge (and I don't necessarily think it's worth challenging). Conversation and consensus can arise, but even then it's useful to have someone to canvas that and say "ok, I've heard the commentary on this topic, here is our selected outcome".
> I think I'd disagree with that - you state it fairly strongly, but I think that each of the items you mention is possible to delegate and distribute successfully, to varying degrees. Much of that is aided by referring to existing patterns that have succeeded elsewhere.
I think we're getting a lot closer to the meat of the issue here. I agree with you that it is possible to delegate and distribute /most/ of what I mentioned successfully to varying degrees. But that leaves the "incompressible" part of the CEO, which is fundraising/investor relations and hiring/org building.
Fundraising is completely impossible to delegate (if you delegate that to someone else, you'll alienate investors) and even with hiring/org building, you have to at least do the recruiting/candidate selection of top lieutenants yourself as a CEO in order to make sure that you are putting the right team of divisional heads in place to execute. You have to be a better coach than the vast majority of coaches out there to succeed in this endeavor, and to even attract and accurately assess the kind of talent that will set up the org for success. It is very easy to mess this up.
On the whole, a lot of what I'm talking about is high stakes high rewards strategic dealmaking. This isn't a common skill for most people to have. It's a blend of analytical (determining leverage points, BATNA in negotiations) and creative (figuring out how to grow the pie) that is hard to practice unless you've done it before.
Most decisions you make here are irreversible. The other challenge with this kind of dealmaking is that the stakes are so high and the counterparties so formidable that if you put anyone except an equally formidable party in place to negotiate with them, you'd end up in a bloodbath that ended up unfavorably for the company and favorably for the counterparty.
In my opinion, that's why we end up at the steady state of executive compensation across most of the world that we see today. It's a miserable job unless you really enjoy it because everyone will (and should) blame you when things go wrong. That is made more challenging by the fact that by the time one becomes a successful CEO, one can generally retire off earnings and/or become an investor with much better WLB and risk adjusted returns.
PS: I'm also realizing another interesting petri dish where we could see parts of what you're suggesting play out are DAOs in crypto. Theoretically, if we can arrive at a DAO that works efficiently, it would serve as proof that for certain kinds of commercial organizations, the chief executive role may be able to be diminished or even eliminated. I am very curious about whether these experiments pan out (and inside my heart hope they do) although I remain skeptical.
> It's a miserable job unless you really enjoy it because everyone will (and should) blame you when things go wrong
The idea that intelligence or hard work or danger justify executive pay defies common sense.
People keep arguing it because they can't think of something better, and there must be some reason for a persistent feature of reality.
But maybe a better explanation is simply that CEOs are being bribed, not to deliberately, neglectfully, or ideologically, wreck everything.
If your job is to steer a huge ship, then the job might not be that difficult, but someone underpaid, and unmotivated could easily have tremendous impact on everybody else.
And if money is the tool that you have, then you want people whose loyalty can be bought - possibly implying they have a neurotic attachment to money as a scorekeeping method.
Of course that often doesn't work, but you can't stop trying.
> The idea that intelligence or hard work or danger justify executive pay defies common sense.
> People keep arguing it because they can't think of something better, and there must be some reason for a persistent feature of reality.
By definition, common sense is not going to apply when it comes to running a modern nation or multi-national corporation. There is nothing common about what it takes to do these things successfully.
> But maybe a better explanation is simply that CEOs are being bribed, not to deliberately, neglectfully, or ideologically, wreck everything.
A thought-provoking idea but not sure it really comports with reality? CEOs almost always report to a board who can and will fire them for poor performance.
If you were looking for a figure who is "being bribed, not to deliberately, neglectfully, or ideologically, wreck everything" then you'd be looking for the chairman of the board and large investors with highly concentrated positions.
Of course, with any of these folks, reputation travels far, so the idea of them being bribed not to wreck everything is prima facie laughable; the reason they don't "want to wreck everything" is because they are looking to max their "society ELO" score. Social credit already exists and applies to people at this echelon of society.
>CEOs almost always report to a board who can and will fire them for poor performance
Maybe? It's not an infallible deterrent and it doesn't remove the incentive to avoid the consequences of bad management in the first place.
>If you were looking for a figure who is "being bribed, not to deliberately, neglectfully, or ideologically, wreck everything" then you'd be looking for the chairman of the board and large investors with highly concentrated positions.
I have no idea what you mean. How are they bribed and how would they "wreck everything"?
>idea of them being bribed not to wreck everything is prima facie laughable; the reason they don't "want to wreck everything" is because they are looking to max their "society ELO" score
Who says that can't be done by destroying a company? All you have to do is convince yourself that the world would be better off, and that you're not afraid of the consequences to yourself.
> Fundraising is completely impossible to delegate (if you delegate that to someone else, you'll alienate investors) and even with hiring/org building, you have to at least do the recruiting/candidate selection of top lieutenants yourself as a CEO in order to make sure that you are putting the right team of divisional heads in place to execute.
> ...
> The other challenge with this kind of dealmaking is that the stakes are so high and the counterparties so formidable that if you put anyone except an equally formidable party in place to negotiate with them, you'd end up in a bloodbath that ended up unfavorably for the company and favorably for the counterparty.
I know you didn't connect these two paragraphs explicitly -- perhaps you had something more like {vendor/partner} establishment in mind for the latter -- but in practice I think they connect fairly neatly.
They ring true based on the way that strategic initiatives from large companies and startups alike often either succeed wildly or fail completely; the outcome depends on the ability to identify an opportunity and then have motivated and ambitious people in place to capitalize on it (both in terms of negotiations and implementation).
Personality-wise: an ability to quickly assess a business relationship, summon the relevant statistics and talking points, evaluate potential outcomes (a nod to your mention of BATNA) and then communicate and work towards the preferred ones: all of that is good. Persuasion, influence and manipulation are where things get a bit murkier, I think.
Environment-wise: is your sense that many of these negotiations are zero-sum? That kind of situation would seem to be a natural fit for extremely competitive mindsets, although my sense is that it could be better to wait for positive-sum opportunities, even if that takes longer and requires {business/market} development. Return-on-capital might not always reward that kind of delay, but I think that effective human advancement does (and, ideally, regulation should try to align those two vectors).
(rationale: positive-sum situations feel like they should be easier to agree upon (aided by the presence of honest and verifiable information), should be more sustainable growth-wise for both parties, and should reduce the risk of disputes occurring later -- something that employers might not necessarily have on their mind when allowing competitive negotiators to dealmake)
> PS: I'm also realizing another interesting petri dish where we could see parts of what you're suggesting play out are DAOs in crypto.
I share your skepticism on this - the code in cryptocurrency {contracts/organizations} as they exist today doesn't stop when a problem occurs; instead the stories we hear about are expensive mistakes and losses of funds.
Code as most developers write it also has limited ways to assess the real-world effect that it has on each contracted party (not to mention uninvolved parties, often equally or more important) beyond basic metrics.
To refer back to an earlier thought: perhaps the hosting environment for the code (not the contracts themselves, necessarily, to be clear, but the hosting environment within which they're evaluate) should look for and reward positive-sum results. And (human) governance of that hosting environment should confirm that those rewards are being distributed "correctly" -- in whatever senses that's possible to determine.
(by the way: thanks for the thought-provoking discussion - even if I've gone off on some unusual tangents)
Frankly, that all reputation. It's like paying for a brand name. There are likely people who can do similar work for less money. It's just that the people putting up the money want the status that comes with the name.
I'm not sure it is "just" that. You are paying for the reputation. He has a proven track record of being incredibly effective. That is worth a lot. There are certainly people who can do similar or better work but how do you know who they are? Plus one false-positive here has astronomical impact.
Not only but that reputation means that he can fetch huge compensation at competitors, so you need to pay to cover that as well.
If that was the case, people would make money arbitraging by doing just that. Fortunately, we don't have to speculate here! One case where you can see how the results play out here are leveraged buyouts by private equity firms.
In this case, the PE firm is incentivized to cut costs in order to magnify the returns on their leverage. Obviously, the largest line item in OpEx is generally compensation, and executive compensation the largest line item there. If PE firms could cut costs here without issue, they would, because they'd make a LOT of money doing it.
I think, rather, that settling for somebody 95% the caliber of Jassy can cost far more than Jassy's compensation in a company as large as Amazon. In those sorts of companies, it's worth hundreds of millions of dollars to eke out a one percent gain in revenue.
Wouldn’t it be harder to believe that an individual who does produce something could generate that much value? There’s a limit to what one person can do. However I’ve definitely seen projects fail with hundreds of high salaries wasted for months or years because of bad leadership.
Of course, but that's a different problem. There are plenty of engineers earning $250k at FAANG who were good enough at grinding leetcode to get their foot in the door but aren't producing anywhere near that much value. Or NNPPs hiding out in Fortune 500 companies quietly pulling in $120k for decades. Sure it's annoying CEOs can be paid so much while failing utterly, or conversely that they can succeed by luck or circumstance that they don't deserve credit for. At the end of the day though, a good CEO can be the difference between life and death for billion dollar companies often enough that the market is what it is.
He'll earn significantly less than the headline number if he turns out to no longer be a good leader, though, because the value of Amazon stock will (continue to) decline.
> Honestly, it's hard to believe that one person who isn't actually producing/outputting anything can create that much value
I'm not going to attempt to justify the number, but this statement is incorrect. Value is provided by working on the right thing. I work for a startup, and ~20% of my time is spent figuring out what we're working on/if we need to pivot, and the other 80% on doing some of that work (with other developers). The 20% of time that I spend choosing what we're working provides an order of magnitude more value to the company than the 80% of my time that I spend developing, and I suspect that as we grow that gap will continue to grow.
If you're only picking what to work on, them how does anything get done? The people executing on that decision are the ones providing the tangible value. I may get downvoted for this, but I think it's stupid that people get paid obscene amounts for making some decisions and having fancy dinners with other big shots. Then they justify making 100x or 1000x what the actual workers do.
> If you're only picking what to work on, them how does anything get done? The people executing on that decision are the ones providing the tangible value.
The situation isn't quite as black and white as that. I'm not just sitting there picking randomly out of a list, I'm ensuring that the people who _are_ providing "tangibles" are providing tangibles in areas that are important to our company and team. Imagine a person can do 5 tasks per week, but they decide to focus on area A which is interesting to them, but not valuable to the project, and area B is something that actually benefits the team/project. By directing those people from area A to area B, you provide a huge value gain. Now consider the fact that I ensure that 10 people are working on area B insead of area A, not just 1. The value of my decision is proprtional to the value of the outcome of all of those people, and if I make a wrong call we're probably done for.
> I think it's stupid that people get paid obscene amounts for making some decisions and having fancy dinners with other big shots. Then they justify making 100x or 1000x what the actual workers do.
It's an enormous stretch to go from "people who execute those decisions create more value" to "people get paid obscene amounts for making some decisions and ahving fancy dinners/justify making 100x what the actual workers do". I did say in the comment you replied to that I'm not going to try justify the specific number, but as an early employee in a 25/30 person startup, you are not getting paid 100x what the people who do the work are for making some decisions.
Have you met Andy Jassy? I have, and can say that the guy is a complete boss. I have no hesitation in saying that he would certainly create that much value. The idea that you can just get someone else to do what he does is patently ridiculous. That's like saying "Why should we pay for Lebron? My cousin is pretty good at basketball and would be a lot cheaper".
Secondly why do you think he isn't actually producing/outputting anything? Just because you may not understand what a CEO does, doesn't mean he doesn't do anything. The guy certainly produces outcomes (after all, he grew AWS into a billion-revenue company faster than anyone else has ever accomplished that task as one simple example).
Finally, the guy is already a billionaire because he's been with Jeff Bezos since the very early days of Amazon. If you want to retain someone like that the compensation is going to be high.
I feel like this statement undercuts the value of a good leader. I've worked under both good and bad management, and it's super frustrating and draining when leadership can't focus and prioritize for the best interests of the product. In addition, leadership skills appear to be much more rare than say, good coding skills. I've worked with tons of good programmers, but not very many good leaders.
> Only $175,000 of that came from his salary. The rest came from shares: He was awarded 61,000 shares that would vest over 10 years, worth $211,933,520, when he became CEO.
tl;dr: his actual salary is some $20m / year. Still high but probably not news-worthy.
The comp is actually more like $20M/year if stock price doesn't tank.
Jassy started AWS (cloud compute side of AWS) with 60 folks or something way back.
He grew AWS to a very large size with very large margins (think $25B/year operating income? Maybe 50-60B in revenue? That is good particularly for Amazon which has had low margins elsewhere.)
AWS continues to compare well financial performance wise with competitors like google.
And folks are freaking out over $20M/year?
Amazons overall net sales are going to be in the 400 billion per year range. They can afford it.
> The comp is actually more like $20M/year if stock price doesn't tank.
I feel like a lot of people are missing the "stock price doesn't tank" part. How much he actually gets is going to pend on the value of the stock at the time. With the way things are going I wouldn't be surprised (even if it's just this year) his take home ends up being significantly less given AMZN is down 30+% since last year.
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[ 4.5 ms ] story [ 118 ms ] threadThe sad truth is that, in recent years, performance doesn't seem to be pegged to compensation anymore.
Not only that, but certain large corporation CEOs do have provisions in their contracts so they get paid handsomely if they are fired, which goes against the very idea of firing people for performance reasons.
It works similar in sports, if there is a 33 year old free agent superstar, every team is willing to give them a 2 year 80million dollar deal (40 per year). So the competition becomes who is willing to guarantee 40 for a 3rd, 4th year.
It may not be a great long term decision for the team, but if they dont agree to those unfavorable terms they're simply not getting the player.
I wonder if there were other companies willing to offer similar payment packages to this CEO and the competition become who would guarantee the money without asking for performance goals.
Main difference here is that the average career span of a pro athlete very rarely reaches 20 years, and deal numbers tend to decrease with age. Executives don't have that problem, in fact it's quite the opposite.
The average age of a CEO in 2018 is 54 years old [1], so I would say yes, they do. The average salary for a CEO in a top 350 company was $13.9M [2].
> They also start getting those paychecks later in their 30s compared to sport players
Compared to the average NFL player ($860,000) [3], and the average retirement age is 27 years old [4], which essentially means that an average NFL player makes perhaps 5 to 6 million dollars in their whole career. Other more forgiving sports, like NBA, puts players on an average of $8 million [5], and an average retirement age of 28 [6], so around 6-7 seasons.
It's worth remembering that these are highly paid professional athletes who most likely come from college teams, meaning that they weren't paid at all.
A CEO, on the other hand, doesn't spend their previous years as an unpaid intern. They are usually top executives already.
In short, CEOs do get paid better on average than professional athletes, all things considered.
[1] https://www.statista.com/statistics/1097551/average-age-at-h...
[2] https://www.epi.org/publication/ceo-pay-in-2020/#:~:text=Thi....
[3] https://work.chron.com/much-money-nfl-player-make-year-2377....
[4] https://investingfuse.com/retirement/average-retirement-age-....
[5] https://www.statista.com/statistics/1120257/annual-salaries-....
[6] https://www.rbcwealthmanagement.com/en-us/insights/professio...
If you tie comp to share price or EPS, they'll try to juice it with buybacks.
If you tie it to revenue, they'll try to grow too quickly and become unsustainable. They'll start doing anti-consumer things like denying refunds.
If you tie it to profits, they'll cut the business down to barebones and whittle away at resiliency and R&D in order to squeeze a bit more margin out each quarter.
Like Warren Buffett's co-ceo Charlie Munger once quipped, "show me the incentives and I'll show you the outcome".
I worked at a company that wanted to do this, and may or may not have behind the scenes.
When I explained that these could easily be gamed, their response was, "Why would someone do that?"
This was at one of the largest banks in the entire world while they were also trying to claim that they were a technology company that happens to do banking. Yeah, okay.
Are you claiming he will get this award every year?
He doesn't "just have to wait". He has to WORK for 10 years or meet other requirements for vesting.
If this was a european style 10 year option package, sure, he could retire and just wait to excercise, that's not what these are.
I worked a lot with Andy jassy, he’s worth the investment.
> Jassy took over as the CEO of Amazon from Jeff Bezos in July. In 2021, Jassy received $212,701,169 in total compensation, Insider reported in April, citing a proxy filing the company submitted. Only $175,000 of that came from his salary. The rest came from shares: He was awarded 61,000 shares that would vest over 10 years, worth $211,933,520, when he became CEO.
> "The way the SEC rules work we are required to report that grant as total compensation for 2021, when in reality it will vest over the next 10 years," an Amazon spokesperson told Insider in an emailed statement on Friday.
> "What this equates to from an annual compensation perspective is competitive with that of CEOs at other large companies and was approved by the Amazon Board of Directors," the spokesperson added.
Knowing a couple of friends who run such firms, let me tell you -- it would be hard to find someone of 25% of that caliber for even 75% of that price.
Value is what the market is willing to pay. There is only 1 Andy Jassy in the world in the same way there is only 1 Jeff Bezos.
No doubt that's not the entire job: there's also networking, communication and thought leadership involved. But similar approaches could apply. Liability could be a trickier one.
There are actual concrete responsibilities that a CEO at that level needs to accomplish, a sample of which include:
- fundraising
- organizational structuring
- hiring
- strategic planning + competitive positioning
- go to market motions
- R&D
- investor relations
There's nothing fungible about any of these responsibilities, so no matter how many ordinary people you stack together, you'll never arrive at even a fraction of what a competent executive can do. Companies have executives for the same reasons countries do.
Executives rotate in and out of power subject to the ongoing favor of their stakeholders, but the hierarchical structure of retaining an executive to represent the will of those stakeholders remains in place because there's no efficient way to operate otherwise.
> There's nothing fungible about any of these responsibilities, so no matter how many ordinary people you stack together, you'll never arrive at even a fraction of what a competent executive can do.
I think I'd disagree with that - you state it fairly strongly, but I think that each of the items you mention is possible to delegate and distribute successfully, to varying degrees. Much of that is aided by referring to existing patterns that have succeeded elsewhere.
> Executives rotate in and out of power subject to the ongoing favor of their stakeholders, but the hierarchical structure of retaining an executive to represent the will of those stakeholders remains in place because there's no efficient way to operate otherwise.
That I do find harder to challenge (and I don't necessarily think it's worth challenging). Conversation and consensus can arise, but even then it's useful to have someone to canvas that and say "ok, I've heard the commentary on this topic, here is our selected outcome".
I think we're getting a lot closer to the meat of the issue here. I agree with you that it is possible to delegate and distribute /most/ of what I mentioned successfully to varying degrees. But that leaves the "incompressible" part of the CEO, which is fundraising/investor relations and hiring/org building.
Fundraising is completely impossible to delegate (if you delegate that to someone else, you'll alienate investors) and even with hiring/org building, you have to at least do the recruiting/candidate selection of top lieutenants yourself as a CEO in order to make sure that you are putting the right team of divisional heads in place to execute. You have to be a better coach than the vast majority of coaches out there to succeed in this endeavor, and to even attract and accurately assess the kind of talent that will set up the org for success. It is very easy to mess this up.
On the whole, a lot of what I'm talking about is high stakes high rewards strategic dealmaking. This isn't a common skill for most people to have. It's a blend of analytical (determining leverage points, BATNA in negotiations) and creative (figuring out how to grow the pie) that is hard to practice unless you've done it before.
Most decisions you make here are irreversible. The other challenge with this kind of dealmaking is that the stakes are so high and the counterparties so formidable that if you put anyone except an equally formidable party in place to negotiate with them, you'd end up in a bloodbath that ended up unfavorably for the company and favorably for the counterparty.
In my opinion, that's why we end up at the steady state of executive compensation across most of the world that we see today. It's a miserable job unless you really enjoy it because everyone will (and should) blame you when things go wrong. That is made more challenging by the fact that by the time one becomes a successful CEO, one can generally retire off earnings and/or become an investor with much better WLB and risk adjusted returns.
PS: I'm also realizing another interesting petri dish where we could see parts of what you're suggesting play out are DAOs in crypto. Theoretically, if we can arrive at a DAO that works efficiently, it would serve as proof that for certain kinds of commercial organizations, the chief executive role may be able to be diminished or even eliminated. I am very curious about whether these experiments pan out (and inside my heart hope they do) although I remain skeptical.
The idea that intelligence or hard work or danger justify executive pay defies common sense.
People keep arguing it because they can't think of something better, and there must be some reason for a persistent feature of reality.
But maybe a better explanation is simply that CEOs are being bribed, not to deliberately, neglectfully, or ideologically, wreck everything.
If your job is to steer a huge ship, then the job might not be that difficult, but someone underpaid, and unmotivated could easily have tremendous impact on everybody else.
And if money is the tool that you have, then you want people whose loyalty can be bought - possibly implying they have a neurotic attachment to money as a scorekeeping method.
Of course that often doesn't work, but you can't stop trying.
> People keep arguing it because they can't think of something better, and there must be some reason for a persistent feature of reality.
By definition, common sense is not going to apply when it comes to running a modern nation or multi-national corporation. There is nothing common about what it takes to do these things successfully.
> But maybe a better explanation is simply that CEOs are being bribed, not to deliberately, neglectfully, or ideologically, wreck everything.
A thought-provoking idea but not sure it really comports with reality? CEOs almost always report to a board who can and will fire them for poor performance.
If you were looking for a figure who is "being bribed, not to deliberately, neglectfully, or ideologically, wreck everything" then you'd be looking for the chairman of the board and large investors with highly concentrated positions.
Of course, with any of these folks, reputation travels far, so the idea of them being bribed not to wreck everything is prima facie laughable; the reason they don't "want to wreck everything" is because they are looking to max their "society ELO" score. Social credit already exists and applies to people at this echelon of society.
Maybe? It's not an infallible deterrent and it doesn't remove the incentive to avoid the consequences of bad management in the first place.
>If you were looking for a figure who is "being bribed, not to deliberately, neglectfully, or ideologically, wreck everything" then you'd be looking for the chairman of the board and large investors with highly concentrated positions.
I have no idea what you mean. How are they bribed and how would they "wreck everything"?
>idea of them being bribed not to wreck everything is prima facie laughable; the reason they don't "want to wreck everything" is because they are looking to max their "society ELO" score
Who says that can't be done by destroying a company? All you have to do is convince yourself that the world would be better off, and that you're not afraid of the consequences to yourself.
> ...
> The other challenge with this kind of dealmaking is that the stakes are so high and the counterparties so formidable that if you put anyone except an equally formidable party in place to negotiate with them, you'd end up in a bloodbath that ended up unfavorably for the company and favorably for the counterparty.
I know you didn't connect these two paragraphs explicitly -- perhaps you had something more like {vendor/partner} establishment in mind for the latter -- but in practice I think they connect fairly neatly.
They ring true based on the way that strategic initiatives from large companies and startups alike often either succeed wildly or fail completely; the outcome depends on the ability to identify an opportunity and then have motivated and ambitious people in place to capitalize on it (both in terms of negotiations and implementation).
Personality-wise: an ability to quickly assess a business relationship, summon the relevant statistics and talking points, evaluate potential outcomes (a nod to your mention of BATNA) and then communicate and work towards the preferred ones: all of that is good. Persuasion, influence and manipulation are where things get a bit murkier, I think.
Environment-wise: is your sense that many of these negotiations are zero-sum? That kind of situation would seem to be a natural fit for extremely competitive mindsets, although my sense is that it could be better to wait for positive-sum opportunities, even if that takes longer and requires {business/market} development. Return-on-capital might not always reward that kind of delay, but I think that effective human advancement does (and, ideally, regulation should try to align those two vectors).
(rationale: positive-sum situations feel like they should be easier to agree upon (aided by the presence of honest and verifiable information), should be more sustainable growth-wise for both parties, and should reduce the risk of disputes occurring later -- something that employers might not necessarily have on their mind when allowing competitive negotiators to dealmake)
> PS: I'm also realizing another interesting petri dish where we could see parts of what you're suggesting play out are DAOs in crypto.
I share your skepticism on this - the code in cryptocurrency {contracts/organizations} as they exist today doesn't stop when a problem occurs; instead the stories we hear about are expensive mistakes and losses of funds.
Code as most developers write it also has limited ways to assess the real-world effect that it has on each contracted party (not to mention uninvolved parties, often equally or more important) beyond basic metrics.
To refer back to an earlier thought: perhaps the hosting environment for the code (not the contracts themselves, necessarily, to be clear, but the hosting environment within which they're evaluate) should look for and reward positive-sum results. And (human) governance of that hosting environment should confirm that those rewards are being distributed "correctly" -- in whatever senses that's possible to determine.
(by the way: thanks for the thought-provoking discussion - even if I've gone off on some unusual tangents)
Not only but that reputation means that he can fetch huge compensation at competitors, so you need to pay to cover that as well.
In this case, the PE firm is incentivized to cut costs in order to magnify the returns on their leverage. Obviously, the largest line item in OpEx is generally compensation, and executive compensation the largest line item there. If PE firms could cut costs here without issue, they would, because they'd make a LOT of money doing it.
But...they don't. Why?
I agree!
I'm not going to attempt to justify the number, but this statement is incorrect. Value is provided by working on the right thing. I work for a startup, and ~20% of my time is spent figuring out what we're working on/if we need to pivot, and the other 80% on doing some of that work (with other developers). The 20% of time that I spend choosing what we're working provides an order of magnitude more value to the company than the 80% of my time that I spend developing, and I suspect that as we grow that gap will continue to grow.
The situation isn't quite as black and white as that. I'm not just sitting there picking randomly out of a list, I'm ensuring that the people who _are_ providing "tangibles" are providing tangibles in areas that are important to our company and team. Imagine a person can do 5 tasks per week, but they decide to focus on area A which is interesting to them, but not valuable to the project, and area B is something that actually benefits the team/project. By directing those people from area A to area B, you provide a huge value gain. Now consider the fact that I ensure that 10 people are working on area B insead of area A, not just 1. The value of my decision is proprtional to the value of the outcome of all of those people, and if I make a wrong call we're probably done for.
> I think it's stupid that people get paid obscene amounts for making some decisions and having fancy dinners with other big shots. Then they justify making 100x or 1000x what the actual workers do.
It's an enormous stretch to go from "people who execute those decisions create more value" to "people get paid obscene amounts for making some decisions and ahving fancy dinners/justify making 100x what the actual workers do". I did say in the comment you replied to that I'm not going to try justify the specific number, but as an early employee in a 25/30 person startup, you are not getting paid 100x what the people who do the work are for making some decisions.
Like a driver of an armored truck that you pay extra, not for driving it being difficult, but due to the value of the cargo.
Does that seem so weird to you?
Secondly why do you think he isn't actually producing/outputting anything? Just because you may not understand what a CEO does, doesn't mean he doesn't do anything. The guy certainly produces outcomes (after all, he grew AWS into a billion-revenue company faster than anyone else has ever accomplished that task as one simple example).
Finally, the guy is already a billionaire because he's been with Jeff Bezos since the very early days of Amazon. If you want to retain someone like that the compensation is going to be high.
> Only $175,000 of that came from his salary. The rest came from shares: He was awarded 61,000 shares that would vest over 10 years, worth $211,933,520, when he became CEO.
tl;dr: his actual salary is some $20m / year. Still high but probably not news-worthy.
The comp is actually more like $20M/year if stock price doesn't tank.
Jassy started AWS (cloud compute side of AWS) with 60 folks or something way back.
He grew AWS to a very large size with very large margins (think $25B/year operating income? Maybe 50-60B in revenue? That is good particularly for Amazon which has had low margins elsewhere.)
AWS continues to compare well financial performance wise with competitors like google.
And folks are freaking out over $20M/year?
Amazons overall net sales are going to be in the 400 billion per year range. They can afford it.
I feel like a lot of people are missing the "stock price doesn't tank" part. How much he actually gets is going to pend on the value of the stock at the time. With the way things are going I wouldn't be surprised (even if it's just this year) his take home ends up being significantly less given AMZN is down 30+% since last year.