I don't disagree with 1000x, but it also strikes me that - at that level - you're more like a pro athlete than a regular salaried employee. Your career and job is on shakier ground as responsibility grows, with less direct control over what actually happens. So greater pay makes some sense to compensate for unpredictability, if you amortize the economic risk of stepping out into leadership across a lifetime.

Also the predominant theory of exec comp is that because it's tied to equity, your incentives as a manager are exactly aligned with what's best for the company.

> Your career and job is on shakier ground as responsibility grows, with less direct control over what actually happens

Contrarily, it seems that many execs "fail upwards" or at least fail into the exact same level, bouncing around C-suites and board positions regardless of the success of their companies.

Additionally - the term "golden parachute" exists for a reason. Many comp packages are structured so the execs are exiting with multi millions regardless of how the company does.

Nonsense. Exec comp is tied to backscratching with the Board, to the detriment of shareholders, who cannot generally exercise effective control under the rules cooked up by the Board and the execs for their own benefit.

Companies that earn profits for shareholders commensurate with market success are companies that the execs have not got their hooks securely into.

I'm confused, do you agree with them earning 1000x more or not? Frankly if there was a legislative way to tone it down so it more accurately reflects their value at the company, i'd like that. Risk, equity, company status, all play an important role but they don't play 1000x the role of any other job.

I don't know how to feel about it. Some Japanese aquaintances have liked to point out that that the difference in salary between top execs and low-level employees is much smaller in Japan. I usually counter that IMO personal experience USA companies pay salaries 2x to 3x more than Japan so I don't really care the boss makes 1000x more given they're paying me more as well.

I have no idea if that translates over the entire workforce though.

As a software engineer, starting software engineers in Japan start at ~$25k a year. Same ballpark as fast food jobs.

I don't know how much executives should be paid, but it does seem pretty high right now. (But it's generally equity so ¯\_(ツ)_/¯ )

When you have the responsibility of 1000's of people's livelihood, their paychecks rest on your hands - you don't think that's worth a heck of a lot more than an average worker? And before anyone downvotes this - think about the responsibility for a bit. Companies don't just plod along - they actively manage into greatness, or actively manage into death.

But when an executive fucks up, he gets a golden parachute. Where is this "responsibility" you speak of?

Not in all cases, and at top levels, of top companies. While I agree some golden parachutes are extensive, one person cannot be expected to see and perfectly manage every severe situation; executive pay can help focus on strategies, but one operates in a fluid market, fluid economics, and fluid landscape.

It is hard to be perfect at one’s job, and no one expects anyone to be flawless executives. But I think we underestimate how much more high-level executives are compensated in relation to their actual duties, and that even a severance package that seems small to an executive is probably pretty large compared to the salaries of most workers, who also do a lot of important work beyond sitting in on meetings and enforcing a set of abstract values.

I disagree. Normal workers are managed via Gantt charts, tasks lists, and projects completed. High level executives are managed in stock price share increase, or business value increase each of which have multiplier effects.

But do any of those metrics really have much to do with how good CEOs are at their job? The “multiplier” comes from the efforts of workers. CEOs don’t create business value - workers do and get paid a fraction of the value they create for their employers. Low-level managers, not CEOs, are the ones making the task lists and the concrete decisions. The CEO just sits in on meetings and occasionally steps in to enforce “values”. At a certain level of abstraction from the actual work, don’t you think high-level management has less impact than the people actually doing the business’ work? Why, then, should they be rewarded more?

I thought the justification for their high salary was to manage dangerous situations as a single entity though? If the execs of DoorDash earn millions of dollars a year and leaked 4 million users data, that's on them.

And yet, they continue earning a salary in one year some will never make in their whole life. And continue to get away with these things.

So i think you're underestimating how many golden parachutes get handed out.

> responsibility of 1000's of people's livelihood,

There are plenty of workers for whom responsibility for other people's lives is a lot more literal than paying wages. Nurses, police officers, even teachers fall into this category, yet somehow we don't see reason to pay them magnitudes more than software developers.

In fact, many of them have much more education and a more qualified at their respective line of work than the average bootcamped software developer. Wages are mostly cultural, not some intrinsic value of work. Aliens would probably find this system one of stranger parts of human culture.

I can't think of many reasons my company couldn't keep trotting along if the CEO left and we went months without. The only thing I can think of is someone needs to appoint the people directly below him were they to leave.

You're assuming companies need to keep growing and need some flashy face of a CEO as a marketing gimmick. A steady business is fine.

A steady business is fine until conditions change. A good CEO can see those changes coming and convince the business to change course.

That change could save the investors and board millions (or could cost them millions) thereby justifying paying enough to get a good CEO.

This is exactly the problem that anarcho syndicalists are eager to solve via worker cooperation. https://en.wikipedia.org/wiki/Anarcho-syndicalism

Anarcho-syndicalism is one of the few alternative ideological strategies i can see working besides capital, but i'm not counting on it happening so for now some legislative measures against this kind of inequality would be ideal.

> When you have the responsibility of 1000's of people's livelihood, their paychecks rest on your hands - you don't think that's worth a heck of a lot more than an average worker?

No, this is absurd. Their paychecks don't simply rest only in the hands of the executive, but in the hands of the worker as well. I'll concede it's a more valuable position, but not 1000x or 100x or even 10x worth the value of the avg. line worker.

Taking it further, frankly most of the executives I've worked with aren't responsible at all. They're generally sociopaths as well!

The Gervais Principle holds.

you're totally free to start a few companies and pay 'fair' salary to the execs you hire

or, if an executive at some publicly-traded company is paid way over his/her value, it would mean that the company is inefficient; subsequently, you may want to invest in the competition, or short this company's stock to exploit this inefficiency

in other words, put your money on the line to prove your argument

It's a shame more HN people don't understand this. You can be pro-business and still recognise the injustice of executive salary.

They didn't used to receive anywhere near as much compensation and still did just fine. It has gone up steeply in recent history.

Wages are determined by supply and demand, no? The number of subordinates doesn’t even figure in the equation

The market for executives is highly affected by many factors that don't fit easily into an economic analysis.

But those factors can easily be summed up as: Trust. Not many are able to demonstrate that trust to the board, and so the supply is vanishingly small.

And trust, as we see in the totally-free-and-definitely- not-completely-composed-of-back-scratching-b-school-flunkies market, is very very expensive.

The boards of firms like Google, Apple and Facebook are hardly composed of school flunkies. Aren't they mostly made up of former tech CEOs and similar?

I think the reality is that CEOs can get paid a lot because the number of executives who can meaningfully increase the value of a large organisation is vanishingly tiny.

Look at Microsoft. When Gates left and Ballmer took over their share price stagnated for over a decade. The organisation missed major opportunities and went nowhere. Now Nadella is in charge and suddenly things are moving again. To us maybe it seems "obvious" that Nadella would be a perfect fit for Microsoft and maybe his good decisions seem obvious, but apparently it wasn't so easy to find such a guy during Ballmer's reign.

What about Google? Does anyone really believe that since the Page/Brin/Schmidt triumverate stepped back that Pichai has been able to really fill those boots? The modern day Google is a visionless organisation that seems to spend its days cat-fighting over how many genders there are.

Getting the right CEO at the top of organisations like these would be worth practically any amount of money at all, because even improving outcomes by 10% immediately drowns their comp into irrelevance.

You forgot backstabbing on the side

Yes, they are deeply effected by much handwaving.

Come again?

There are always a lot of people looking to justify how things are, independent of how much sense it makes.

Paying the CEO 1000x the average worker is more likely to be sustainable with 100,000 employees than with only 100 employees, so I think the number of subordinates figures in the equation somehow.

people don’t have to struggle needlessly so that one kind of work can be glorified

Everyone contributes

There is a competitive market for talent. The board is going to try to hire the best person they can. That person typically has lots of options.

While there is truth in the existence of that competition, it is also a fundamental mistake to believe this market is basically a meritocracy.

C-suite execs have something common with politicians that way. To wit, some of them get to the top by being very good at the things they do and having generally respected talent... but another path is to be good at campaigning.

Leaders are leaders. You can't trust anyone with power if they want power, but you have to give someone power. The contradictory demands make people make weird decisions, because trustworthy people seem infinitely scarce.

Money is a diversion from destructive uses of power, besides being a response to apparent lack of supply.

You don't have to give someone power - you can have cooperatives or other forms of democratic management.

It's a meritocracy in the sense that boards want to hire executives with prior experience running large companies or large divisions. How many such people are available for hire and didn't run their last company into the ground? It's a tiny number.

On the other hand, I worked for a president who was brought in to run a brand new division, ran it into the ground within a few years, was forced out of the company under rumors of financial improprieties, and was recently announced as CEO of another company. So, who knows? Maybe boards are just stupid.

I dont mind executives earning millions, but perhaps their salary should be capped at 100x of average employee.

The do not run the ship alone, and if the ship does well, the rest of the crew should be at least paid lip service. I would like to see some framework for doing that, whether that is profit sharing or relative salary caps.

Also I believe all salaries in the country should be public. How is free market suppose to work if no-one knows the price?

Instead of capping (which people for whatever reason don't seem to like) why not propose a lower bound for regular employees of 1/100th of the CEO's total compensation?

CEO wants to make $20M? Nobody in the company can make less than $200k. Seems fair to me.

> CEO wants to make $20M? Nobody in the company can make less than $200k. Seems fair to me.

This seems likely to result in a situation where any work that can be is performed by external contractors not "in the company". Unfortunately, it's very hard (or maybe impossible) to legislate what things should cost.

Why do you think the operation of a complex decentralized economic system would be improved for workers if it operated according to some rules that you think are fair?

I agree, except I would prefer we use median or mode compensation. It would probably paint a fairer picture. But debatable.

Salary transparency at all levels would help quite a bit. The SEC rules around required pay package disclosure for execs is a major reason that CEO pay spiked in the 90s. You gain a good amount of negotiation leverage when you know exactly how much each or your peers are making.

We're working on salary transparency across different levels with our website http://levels.fyi (mainly software engineering to start).

We were thinking of launching an executive version of our site. Still in our plans down the road, but it'd require people willing to submit their compensation to our site in a verified way. We're still brainstorming, but there's a lot more nuance at upper levels where people negotiate across way more things than just strictly compensation.

Compensation is usually defined more by risk/reward tradeoffs than by the amount of effort you put in.

Executive pay is high because of the risk that your values will not line up with the board's values at some point in the near future and hence you'll be summarily fired over something you had little control over, with your career being effectively over. It's not out-of-line with other careers that have similar risk/reward tradeoffs, like being a startup founder, pop star, hedge fund manager, venture capitalist, bestselling author, or lottery winner.

I was thinking about the Gervais Principle [1] while reading this, in particular this formulation:

"Sociopaths, in their own best interests, knowingly promote over-performing losers into middle-management, groom under-performing losers into sociopaths, and leave the average bare-minimum-effort losers to fend for themselves."

This rather absurd strategy actually makes a lot of sense given the risk/reward tradeoffs of being an executive. Doing nothing under conditions of extreme risk & uncertainty, but doing it in a way that looks good to your superiors, is exactly the skillset that one needs to be a successful executive. And people who can do this without getting fired have passed the first test already. So this selection process is effectively an extended job interview.

[1] https://www.ribbonfarm.com/2009/10/07/the-gervais-principle-...

> Executive pay is high because of the risk that your values will not line up with the board's values at some point in the near future and hence you'll be summarily fired

Lots of people live with that risk every day and get paid peanuts.

Don't underestimate the value of doing nothing.

People who can be bribed with money not to use power to wreck things are perhaps scarcer than the average person realizes.