It's a tiresome discussion. Why do we always bring up CEO compensations, but never Hollywood actors', professional athletes' or even painters' (or art traders' - https://en.wikipedia.org/wiki/No._5,_1948)?
Salaries don't need outside validation by people why have no idea what the job involves, but try to assign some "value" to it anyway. It's a free market and CEOs don't get hired if they have outrageous demands and there are better candidates available.
Do you mean that whenever we discuss CEO remuneration we must also add a parenthetical remark to the effect that the discussion most likely also applies to a list of other categories of person?
If so then I think we can simply petition HN to add such a declaration to the terms and conditions of the web site, for instance:
- Any discussion of remuneration of any entity receiving more than 1MUSD per year is deemed to include all other categories of entity where at least one member of that category receives at least that amount.
If not then we must litter our discussions with pointless qualifications. Perhaps it doesn't matter, a lot of the comments, this one included, do not advance the discussion so their content doesn't matter.
I certainly bring up professional athlete salaries. Given that they produce absolutely nothing of value beyond a marketing opportunity, they're all overpaid for very little real work. It's not like they're curing cancer. Actors? Memorize some lines, and have lesser-paid minions tell you how they should be repeated.
All that's really happened is that a class of people have managed to market themselves to a section of the population - sports stars, actors, CEOs and politicians. They've made themselves superstars, and unfortunately, sufficient numbers of people believe in the legends that they can ask for whatever excess they like and get it.
Likewise, a professional athlete plays on a sports team. That sports team generates millions of dollars a year in television contracts. Hundreds of people are employed both at the stadiums at which they play as well as at the television stations that air the games. Millions more are made from merchandising, jerseys, hats, etc from the sports team. Hundreds more are employed making and selling those products.
And yes, they also become marketing machines. Yet that marketing machine sells products and people are employed at those companies that make and sell those products.
The ripple-on effect of a super-star professional athlete like Michael Jordon or LeBron James generates wealth for tens of thousands of people.
So, if that's true, they are compensated for excelling at self-marketing, i.e. for having a valuable (in our society) skill and not for others' perception of "created value"? I personally have no problems with that and don't find it objectionable.
I hear you, but there's usually a magnitude difference between these occupations and the highest paid CEOs.
Is there?
According to http://incomefile.com/richest/top-10-highest-paid-ceos-chief... , https://www.forbes.com/actors/#22dd8ef340fe and https://www.forbes.com/athletes/list/ it's the same range, approx. $20m-$100m.
Once a CEO, always a CEO. Even if you blow up a few companies, you can always run for President (Carly Fiorina and many others)
I don't think this is the case. Why aren't you hiring the janitor to do the CEO's job? Are you sure there's no merit in the negotiating process? You even undermined your point right here:
> They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable.
At least one of the reasons someone is difficult to replace is because they have rare talents, they're particularly good at what they do...they have merit.
There's a lot of noise surrounding measurements of skill. Witness the regular articles here about how to interview people.
The reason why CEOs make so much is related to this. Very few people appear to have the skill, but that is also why their wages are inflated in relation to what they ought to get. Because the penalty for hiring an incompetent seems so high, we want to make absolutely sure we get a "real" CEO. This means there are loads of people who could do the job, but due to a lack of credentials such as appropriate previous experience, those people cannot be hired. There's also the fact that you can point to the credentials if things do go wrong. "They hired him there, so it must be our business that's hard to fix." I think it's Tyler Cowen who calls this a star system. Similar dynamics occur in other high paid labour markets.
If you look at what a CEO does, you have to wonder why so many divisional managers are often passed over for an external candidate. After all they should know a fair bit about the company and have similar skills.
On a more software related note, look at job ads for programmers. Why do they specify one web framework when probably anyone who's used any of the major ones would probably be able to learn quite easily? This type of dynamic probably gets even stronger when we're talking about high powered exec jobs.
It's not even a real argument against a corporation, since corporate raiders and the like also say CEOs are overpaid.
At least CEOs have to get up and go to work every day - what does the word earnings have to do with heirs who get dividend checks every quarter from a company? They are as removed from the process of creating wealth as you can imagine.
You are not alone: https://www.nature.com/articles/s41562-017-0082
IIRC the research shows humans are perfectly fine with inequality, what gets us angry is "unfairness", or inequality that is not "earned".
Not personally, but I sure do remember jealousy from people who didn't -- want to -- work as hard or thought they didn't have "enough natural talent" to be like them.
I don't think it's too far off to say human mental models transcend class and that a portion of those who rally against inequality (because they are on the victimized end) are part of the group I described above.
As for how this applies to the discussion? I cannot think of anything. I just think it's important to remember human behaviour isn't fair, rational, or black-and-white (which on the surface flies against the "widespread mental model" claim).
"We’re invited to believe that a CEO can somehow ‘earn’ £10m per year, whereas a teacher ‘earns’ £25k per year. That’s only possible if you divorce the word ‘earn’ from any of its actual meaning. No one can actually work enough hours, or create enough value, to equate to £10m."
I think this is the essence of the recent debate about inequality. I think most people would not have a problem with those who are genuinely producing more getting more as well. Think back to school, did you ever complain about your grades if you knew some other kid had worked harder? Me neither. Of course there were times when it seemed arbitrary as well, seemingly having no relevance to quality.
It's a big problem creating a notion of fairness when you move on from school, where everyone is the same age, in the same class, doing the same homework. To create software, for instance, what do you typically find? There's people of various ages, some managing, some selling, some writing code, some doing testing. You need all of them to get the job done, and the job has some sort of value, however vaguely defined, that is greater than the sum of its parts. Nobody on the team could do all of the team's work as effectively as the team.
So then we have the problem of attribution. There's no real way to say what fraction of the value someone created. The only thing we really have is negotiating positions. If you're able to say "Give me half or I'm taking my ball" convincingly, your teammates will give you half. They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable.
This will have some interesting effects. If you're already making a lot, you'll probably need a lot to want to participate. You have more savings in order to hold out for a better offer. CEO guy "genuinely" needs more pay because why wouldn't he just retire now? Janitor guy will take any offer, because he needs to be running to stand still. Actually a lot of people will be in that position, even though their labour is generally seen as useful, like teachers.
Which is all just a long way of saying that the negotiating process does not in itself take merit as an input.