[falcolas]

This 'misconception' comes from two big sources, IMO:

1) Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages.

2) Companies always discuss employee compensation, especially raises and bonuses, in terms of the value an employee has relative to their peers.

So, it's no wonder that people believe that their value has something to do with their compensation: it's what they've been told by the companies themselves; it's how the most visible employees (leadership) are compensated.

[nicoburns]

> Leadership is paid for the value they bring. Primarily through huge stock grants as part of their multi-million dollar compensation packages.

No they're not. They're massively overpaid relative to value they bring. They generally get these multi-million dollar compensation packages regardless of performance. Presumably this is also because of their power to negotiate which is high because they're more or less in charge of everything.

[cercatrova]

Correct, even leadership is paid according to the market. Companies know that of they pay too little, then leadership will go elsewhere. It's not any different to regular employees in terms of getting paid according to supply and demand.

[falcolas]

Overpaid or not (I tend to agree that they are overpaid), if a significant portion of their compensation is stock grants, then that portion of their compensation is directly tied to the value of the company.

[nicoburns]

I'd argue that the value of the company often doesn't reflect whether they're doing a good job. Which is why you often find CEOs taking short-termist approach which buoys the value of the company in the short term and completely destroys it in the long term.

[bumby]

There's a famous study that concluded "CEO effects" only account for about 14.5% of performance [1]. It may be quite dated by today, though, it may be even less pronounced according to [2] that claims more recent studies show the CEO only explains for 4.5%-12.8% of performance.[2]

[1] https://www.jstor.org/stable/2094020?seq=1

[2] https://www.theatlantic.com/magazine/archive/2009/06/do-ceos...

[phamilton]

In 2020 the value of the company largely was driven by the Fed.

[bumby]

>that portion of their compensation is directly tied to the value of the company.

One small nuance: it can be disproportionately tied to the short term value of the company. One of the moral hazards of this compensation scheme is that it may incentivize an executive to make decisions that inflate the value of the company short term while also de-valuing it long term (when they are no longer part of the company -- presumably after they've extracted that value).

[ledauphin]

stock grants mean you're paid for the value your company _has_, not the value _you_ provide to your company.

For the vast majority of leaders, their input into the company's overall performance is vanishingly small.

[falcolas]

The job of leadership is to make the company succeed. The value of the company is a simple (but effective) "Key Result" metric that's used to evaluate how well they're doing their job (no matter how many others are also contributing).