I think this is ignoring the risks associated with such a change. You might find people qualified on paper, but you really don’t know how that translates into real world performance until you try it.

The risk of getting that wrong and accidentally destroying billions of dollars of shareholder value (don’t like the term, but it seems appropriate here) is very high (low likelihood, extremely high severity).

As a board member, why would you take that risk, when not taking the risk is so cheap? Ultimately I don’t think the risk weighted expected return on finding a cheaper CEO is greater than just paying Tim whatever number he pulls out of his arse. I suspect expected return is actually substantially lower (probably very negative) than what Tim gets paid.

The risk is being taken primarily by the employees and the shareholders, but many of the rewards go to the CEO.

Boards of directors are scared of getting it wrong, and they memorialize that fear in contracts that throw tremendous amounts of money at their preferred candidate, often making guarantees regardless of performance.

But it’s not like boards have a spectacular record on picking CEOs in general. Well-regarded people blow it as CEO every year, but they still get tons of money. Why? Because of this deep belief that “CEO-quality” people are extremely rare, so every plausible candidate is incredibly precious.

To be fair, business boards are not unique in this failing. Professional sports teams fall into the same trap all the time.

I perfectly accept that CEO pay in general is completely out-of-wack with anything anyone would consider reasonable, and agree that being paid $750mil is nuts.

What I take issue with is the idea that companies and boards are making irrational, or economically illiterate, decisions by paying CEO this amount. I just don’t think that argument stacks up.

As you say yourself boards don’t tend to be very good at picking executives, and may of them are probably aware of that. So why rock the boat when you’ve got a CEO who’s performing.

If you want to talk about the social consequences of CEO pay, that’s a different story. I would be quite happy to support the idea of CEO pay caps linked the lowest paid employee (I leave the question of what qualifies as an employee as an exercise for the reader). But I think that’s a very different argument to an economic argument.

>The risk of getting that wrong and accidentally destroying billions of dollars of shareholder value

Definitely happened for HP when they took on Leo

And Yahoo.

> I really don't think Apple's valuation would change much if Tim Cook is replaced

Apple's current valuation is $2.49 trillion. A trillion is literally a million millions.

So that puts them at 2,490,000 millions. Due to meeting various goals, Tim Cook is getting 750 millions. That's ~0.03% of the company's valuation.

Apple's valuation wouldn't have to change very much before it would have been better to keep Cook in charge, even with higher compensation.

Maybe, but how do you know who they are? Judging talent, especially executive talent at the outset is extremely hard.

It sure seems like whatever Tim Cook is doing is working. Remember when Apple went through three CEOs in a decade and nearly went bankrupt? Mismanagement of a company for even a few years can put a company in a tailspin for a decade. For a mature successful company Tim Cook is exactly what you want. Why mess with success?

Does Tim Cook staying around for another year mean the stock is 0.03% higher than it would be otherwise? If so, this is a wise decision from the Apple board.

Thousands seems high for the largest company in the world with potentially the most complex supply chain ever assembled. And that doesn't even mention the political issues that need to be navigated.

Your choices I imagine are the other Apple executives and the CEO of another International technology and/or manufacturing (potentially) company.

"the most complex supply chain ever assembled."

Right, all the people running Amazon, Wallmart, Nasa, BMW, Tesla, Spacex, managing contructuon of nuclear powerplants have no knowledge of supply chains.

You know, an iPhone or a macbook has more parts than an A380

> Probably thousands?

Lmfao. Hacker News, never change.

Certainly thousands of people could achieve similar or better, finding one of them just happens to be incredibly difficult and risky.

"Similar" on the scale of a company worth $2.4 trillion isn't negligible. Nor is "difficult" or "risky."

There's one person in the world with a proven track record of succeeding leading the world's most valuable company over a decade. This compensation is a drop in the bucket relative to even a single strategic mishap by a less qualified candidate.

I wouldn't want to be in charge of that headhunt, for sure.

Introducing the new CEO of Apple, Carly Fiorna!

At that level there is no such thing as 'qualified candidates' like in a generic job where you just fill your positions.

There is no justification needed (in the traditional sense), but there was one anyway: board set a goal, Tim had to meet that goal, and then they'd give him the money.

Say Apple made a couple hundred billions under Tim Cook's leadership and the way was paved for more of that in the coming years (keep in mind that there is no day-to-day, this really is many-year-planning; you practically have to predict the future to some extent), is a fraction of that really such an odd case to pay the person that did that?

Sure, you don't need that much money to live comfortably forever, but this is capitalism, I doubt the value created was needed either. But the board and Tim agreed and met their goal and thus the transaction was completed.