[grecy]

> 't that precisely what you get from competitive pressure in a free market? Things end up priced barely above production costs.

Evidently no. Companies are making hundreds of millions in profit every ear, they're paying their CEOs tens of millions as a "bonus".

They're they're making a lot, LOT more than just "barely above production costs"

[krapp]

We don't actually have a free market, though. Free markets don't exist in the real world, only the "perfectly spherical cow in a frictionless vacuum" world of economic models.

[TeMPOraL]

There is no competitive pressure within a company. CEO pay is usually an insignificant fraction of a company's revenue; there's enough inefficiencies both within the system and within the market to allow this to exist, even if the actual product of a company is a commodity.

The other part of my comment also mentioned that companies do everything they can to avoid being commoditized: that's another source of inefficiency/surplus revenue. The market is in flux; commoditizing takes time.

[bawana]

"CEO pay is usually an insignificant fraction of a company's revenue" What is insignificant? For example, the CEO of Aetna walked away with 500million. That's money that should have gone to insured, injured and sick people. What risk did he take that exceeded the risks of the children we sent to Afghanistan and Iraq?

[TeMPOraL]

Well, according to [0], Aetna's revenue in Q3 2018 was $15.5 billion - so, extrapolating, their yearly revenue was something on the order of 60 billion dollars, of which that 500 million you mention is just 0.8%. Also, some of that $500M is in stock, not cash.

--

https://www.modernhealthcare.com/article/20181030/NEWS/18103...

[grecy]

> that 500 million you mention is just 0.8%.

It's not about what percentage of their revenue it is, it's about how that money that should go to adding customer value, not making exceedingly rich people richer.

500 million dollars could change the lives of tens of thousands of people that Aetna calls customers... but instead it goes to ONE person.

It doesn't have to be that way.

[changchuming]

It also says that the net income is 1 billion though, and 500 million is half of that. High revenue doesn't always mean that the company is generating that much value. Just look at Uber.

[Jommi]

I really dislike seeing comments like this on HN, just utter lack of foresight into just the basics of economics or even just commenting. What "companies" are you talking about? What does CEO pay have to do with the subject at hand?

[grecy]

I'm genuinely asking questions about why the economy and setup is the way it is, and why can't we change it to something better.

Everything can be improved, and we should strive to improve everything. I'm very aware of companies that operate very well without making a profit. They add a lot of value to society, the employees get paid and they're even expanding (MEC in Canada). But no profit. Nobody who doesn't work there gets richer. So why don't Apple work that way. Why doesn't Comcast work that way.

CEO pay represents a huge surplus of money (profit) that wasn't needed. The products and services offered by the company could have just been discounted that much, or the employees could all have been paid more, not just one person.

[Jommi]

Please search Google salaries on papers regarding executive compensation. The pay they are receiving is usually economically sound and integral for the whole system working.

It's very hard defend the argument "CEO pay represents a huge surplus".

How much value does that CEO being by his skills/decisions? Why would he be hired with the salary he receives (that he does not get to decide) if he didn't create more value than what he costs? It's just like any other employee, except a more competitive space and where decisions have larger profit effects.