The point of this article isn’t to argue that $200M is a large proportion of $1.6T. The point is that one person is taking home the equivalent share of 1000s of workers, in exchange for totally eliminating their jobs.
Bullshit. Fucking nonsense, bullshit.
I fail to understand how thinking people could ever believe that this is true - it's got to be innumeracy and a healthy dose of propaganda. Would Google lose the now-equivalent of 200m annual if any one of the top 100 leaders within the corp ascended to the goddamned throne? Fuck no. It's nonsense to believe any one person is worth compensating at that level.
And athletes usually have no right to fire people (at least not a lot of people at once).
Tom Brady famously got Gronk out of retirement and Brown was on the team because of Brady despite having a horrible reputation and being essentially blacklisted from the NFL.
Star players are a dime a dozen in professional sports and I don't think their influence on the team makeup is as rare as you think. In fact, a big name star might have _more_ hiring power than a typical CEO in a public company.
Maybe that analogy is more apt than you intended though, in that the valuations are made for shallow human/society reasons that are quite decoupled from reality.
Do you have examples? The ticket sales alone that big name players drive to home games make far more than 100MM over the course of their contacts.
https://www.statista.com/statistics/294166/toronto-blue-jays...
That doesn't even include all the merchandise and the food/drink sales and all the other benefits that come from signing big name stars. The CEO of a company doesn't have the same "star" power a pro athlete, musician, or actor has.
In other words one can pretty clearly attribute the performance of an athlete to said athletes talents and ability. In the case of the CEO making the same money, it's much harder to measure their performance, and even harder to attribute the success of the company to their direct performance. This point becomes even more true as companies grow in scale, such as Google has done.
That doesn’t mean that their performance can’t significantly affect their companies stock price to a much higher degree than similarly paid athletes could.
> Physicality is far more measurable
Who cares. Do you believe that only people whose output could be precisely measured should be highly compensated?
Of course there is a lot of inefficiency considering Pichai seems to be a very poor CEO who’s quite replaceable.
Only on average over long term of course. There is quite a lot of variance considering how useless someone like Pichai seems to be.
Like, run the clock forward and imagine Google monopolizes half of GDP. Should the CEO be compensated as a percentage of that? It's a fallacious view - how many super hard working and ultra educated people could be recruited to that post for, oh, say a cool 1M per year with a good retirement plan and no stock nonsense. Tons - a huge list of people who don't have the right connections to sit atop the money pyramid.
Both attributes seem to be somewhat tangentially related to being a highly successful CEO.
There are plenty of examples of “super hard working” and educated CEOs running their companies to the ground and costing much, much more than just $200 million..
Obviously this system is very inefficient but nobody can deny that some CEO are better than others and that the best ones can make decisions which bring 10-100x or more money to the company than whatever they are paid.
So if the board of 100 billion company believes that a CEO they can hire for 100 million will increase growth/profits by more than 10 million CEO would it seems perfectly rational to pay him as much (they might be awful at picking the ’best’ person but that does not invalidate the core principle)
There's nothing obvious about this to me - how would you distinguish that from survivorship bias? Why then do shareholders and boards often come into conflict on this issue?
Claiming that someone is worth paying 100m per year is an outrageous claim that requires commensurate evidence, not a wishy-washy statement about boards thinking its worthwhile. Boards are made of people in a very small oligarchic circle - their behavior is more easily explained by remembering that they're social animals in a hierarchical context than pretending this is all perfect economic rationality.
So success of companies is entirely random? That seems statistically unlikely…
I mean are you really saying that there are no decisions that CEOs regularly take due to which a company might lose/gains up to millions to billions of dollars? Why wouldn’t you pay a CEO whose actions can bring the company billions a 100m or so? Seems like a good deal..
e.g. if you put a random highly competent, educated and very hardworking person in charge of Apple back in 1997 is it more or less likely that he would have done better than Jobs?
I mean, yeah I agree with you in part. In most cases it’s hard to distinguish real impact (even after a few years) from survivorship bias which is why this whole process is so inefficient. I’m sure that quite a few companies are just as likely (if not more likely) to hire a 100+ mil CEO who’ll be a net negative on as one who’s action will bring 10x+ in additional revenue compared to what most other candidates would have.
You're claiming that it's worth paying CEOs 100M+, and my point is that whatever level of competence/skills/judgement/character you desire for performance should be achievable at an order of magnitude lower salary offering. My point is that this astronomical compensations represents a really outrageously strong market claim about someone's performance, but the only evidence you're offering is that some companies do better than others. That is exactly what we'd expect in a market with many companies trying different things - aka, survivorship bias.
This is super common in tech, where people assume that successful entrepreneurs (for example) are visionaries, when in fact they had to be BOTH visionaries and ALSO incredibly lucky, and any structural advantages they had to acquire capital also help a lot.
> I mean are you really saying that there are no decisions that CEOs regularly take due to which a company might lose/gains up to millions to billions of dollars? Why wouldn’t you pay a CEO whose actions can bring the company billions a 100m or so? Seems like a good deal..
This is disconnected - that does indeed happen, and it's been interesting to watch e.g. Elon Musk set fire to several billion dollars along with his reputation over the past few years. My argument though isn't about whether or not CEOs are important, but whether or not their compensation is actually tied to their real value, or whether it reflects their membership in an oligarch class and their skill/luck in navigating that socioeconomic environment. This is a question about opportunity cost. Note - I would also be willing to believe that the perception of having a genius CEO who is "appropriately" compensated on a cosmological pay scale is valuable as a social signal in and of itself, and I would also object that this is irrational. In an economic system that capped CEO pay, that social signal could still exist unmodified at much lower absolute levels of compensation.
> e.g. if you put a random highly competent, educated and very hardworking person in charge of Apple back in 1997 is it more or less likely that he would have done better than Jobs?
Weird example, since Jobs took a salary of $1 during that time.
> I mean, yeah I agree with you in part. In most cases it’s hard to distinguish real impact (even after a few years) from survivorship bias which is why this whole process is so inefficient.
Couple that problem with ANY reasonable prior on the distribution of abilities in human populations and the distribution of salaries, and you end up with exactly what I'm proposing - CEO salaries are easier to explain by looking at human societies than any possible collection of individual attributes that such a CEO could possess.
Is he worth more? Is he worth less? Literally all of this stuff is not anyone’s business outside of their company and their stakeholders. We can’t truly have a clue what doing a “good job” is with them, or what the compensation should be.
They want to ruthlessly hire-fire talent - it’s all entirely on them as a company. Being outraged about any of it is just as naïve as buying into the idea that their monopolies are built on merit and not on elite credentials and pedigree required to join the club.
For what it’s worth, I think the enormous payouts are there so that these guys’ judgement and decision making is 100% directed only on the company’s value and well-bring. They’re supposed to be in-bribeable.
Hard disagree - capitalism is great up to a point, but a functioning market and vibrant tech sector doesn't require that we allow individuals to become this obscenely wealthy. Answering the question of how extreme we want income/wealth inequality to be allowed to become is a valid economic question to be answered societally.