[crdoconnor]

>If the company CEO replaces half of the workers with robots that can make 1,000 widgets/hr, the workers won't benefit from that because they're still making 100 widgets/hr, while the executive just 5x'd the factory's output, which is likely to be worth a bonus.

Where's the value add of the CEO here? They didn't create the robot. They are not operating it. They're a middleman.

Middlemen should typically have very low margins in an efficient market.

[JabrZer0]

You're getting at the heart of it here, I think. The CEO's job in this case was to gather the information necessary to make a good decision about which robot to purchase, then use her (hopefully) experienced judgement to make the best possible decision for the value of the company. There's definitely some value to that process, but I think most people would agree that it's not worth the multi-million dollar bonus she'd probably get from the 5x productivity increase.

Executive pay being tied to company performance is a good thing for the health of the company (no comment on whether that's "good" or "bad" overall) as long as the metrics are defined correctly, but at some point the absolute amount of compensation lost its relationship with the actual effect the CEO has on the company. But that makes sense... I mean what do you expect to happen when people essentially set their own pay? The "in" club of board membership is very much a real thing, and responsible behavior at the expense of other board members is easy enough to punish at another company's board meeting where the pecking order is reversed.

[sokoloff]

Depending on the scale of the increase, I have no problem with her multi-million dollar bonus as a result of superior business outcomes generated under her leadership. Hell, I don’t even care if she was originally opposed to buying the robots and only decided to after a compelling presentation from the COO. The buck stops with her and if she generates superior results in 8-10 figures, multi-million payouts aren’t hard for me to swallow as a shareholder, employee, or customer.

[lovich]

That would make sense if CEOs had some downside to failure, but they don't anymore. All though CEOs who have golden parachutes to cover their failure, and massive salaries to cover their successes mean there is no connection between performance and pay. They just get a lot all of the time

[bluGill]

The CEO is not a middleman. The CEO is the one who does the market research to decide if the market can absorb making 1000 widgets/hr, or if it will saturate and cause him to be unable to make payments on the robot and thus go bankrupt. The CEO is the one who decides if they put R&D into making widget 2.0 (which the robot wouldn't be able to make but the humans can), or if widget 2.0 couldn't be enough better to be worth the R&D and thus isn't worth it. The CEO is the one who sees competition coming from China and realizing he cannot compete and comes up with a plan to do something else so that as China is ramping up he is ramping down and transitioning.

The above is a very hard job with hundreds of places where some decision could be wrong. A good CEO generally makes enough good decisions that the company stays open for years, while a bad CEO will make decisions that cause the company to go out of business.

[crdoconnor]

>The CEO is the one who does the market research

In all of the companies I've worked at somebody else was paid to do that too.

That person was typically not overpaid.

[mbrodersen]

Where is the proof that CEO's make better than random decisions? Companies go bankrupt all the time.

[bluGill]

Steve Jobs.

Of course many ceos are a negative on the company. There are many studies on ceos, high priced ones generally are bad, while the unknown insider who moved up the ranks is probably good.