TheStranger wrote:That's not really how salary negotiations play out. [...]
It's not "Hire me at this unreasonable rate. Think of what will happen to you if you don't"... rather it's "Hire me at this rate because I will run your company and make you money, if you don't then I will find a company that will pay me what I want."
Here's where things get sticky. I'll grant you that most stockholders do not think their company is being held hostage by a CEO, but there are two reasons for that. One, the CEO pay is, like I've mentioned, a thin margin compared to the total profits of a company. 50 million compensations pale in comparison to billions-dollar profits. (Mind you, I'm not railing against corporate profits.) The other reason is that most stockholders are lazy, or know little if anything about the company. Granted, the large stockholders who've been around for a while do care, but the CEO does everything he/she can to whittle out their influence on his/her compensation packages, among other things, claiming that that's 'to be left up to the CEO! I mean, why'd you hire me, right guys? *wink wink*"
The core underlying problem is that there is the possibility
(some would say very likely) that CEOs are, overall, overpaid. So let's think about how a concerted effort to drive down CEO pay any amount would go. Company A says they're transferring all of their Golden Parachute compensation over to stocks. Collectively, every CEO on the market says, "Fuck you, that sounds like an awful deal." While Companies B-ZZZ say, "No way we're following that route. We want to have better CEOs than Company A, so we have to offer more, we have to offer what each other are offering." This can, does, and will happen. Therefore, regardless of whether CEOs are overcompensated or not, there is no solid method in the status-quo to break the 'price floor' on a CEO's labor
, mostly because of a grossly overestimated contribution of the CEO to a company's worth.
The lunatic stock markets also has something to do with this. Just as they react favorably to CEOs who 'clean house' in bad times by firing Blue Sky divisions (historically horrible for long-term stocks), they would immediately react unfavorably to any company who offered 'sub-par' compensation. Can you not see this as a problem? It's literally the reverse problem of the pre-Union days, where people were being extorted to work whatever they could get, at whatever rate they could get until they had the balls (and enforced permission) to Unionize to jolt the market. If there is no market mechanism (and if I'm wrong, please tell me) to drive the wage down, but there are mechanisms to drive it up, how can we expect, over any given period of time, that the wage ISN'T entirely too much? Speaking of Unions,
ExistentialVigilante wrote: Unions, monopsony, imperfect market, etc. all partially invalidate this.
Unions aren't part of fair market action? What right does the market have to prevent people from freely associating?
TheStranger wrote:Except that it is nearly impossible to quantify such an increase without also including the luck factor. All that any given boss can do is look at the performance of a given individual and see how successful they have been in performing the tasks given... luck plays into that, and I cannot see any way for it to be quantified and removed from the calculations.
I'm not sure what you're saying. Are you saying it's impossible to quantify how much of a CEO's success or failure is due to luck? You're right in that sense. But it's not information that's not ascertainable. You could, for example, look at an infamous "CEO Strategy" or several of the hundreds of "Executive Training Courses" and try to find correlations with success. If you don't, maybe you should consider not giving a shit when your prospective CEO says he has the best new thing to fix up the company. Maybe you start to think, like traders do, that random monkeys making picks outperform 'strategies', and that really all you need is someone to handle basic rules every CEO should follow and beyond that, I dunno, pay a small group of people to think up actions for the company.