The decisions made at the executive level regarding Netflix will have a much greater impact on each shareholder's value than the decisions made regarding Squid Game's creative direction. I mean it's not even a question. Now could you find someone to do as good a job as an executive for less? Maybe but when you have a 180 billion dollar company why are you going cheap here to save a few bucks? The wrong executive can be utterly disastrous, and a lot of what I think stockholders are paying for is risk reduction.
C-level folks make huge strategic and tactical mistakes _all the time_. They are humans. Amazon has burned tens of billions of dollars on dead-end consumer electronics devices (fire phone?). Facebook is shoveling money into a burning pit trying to convince people to wear goggles for eight hours a day so that they can beam ads directly into our eyes using lasers. Huge companies fail and flounder for decades before toppling over under the weight of incompetent, highly-compensated leadership - this is the norm, not the exception.
The assertion that paying more money to the folks at the top has yielded commensurate returns is really not backed by ... anything at all, as far as I can see.
What if you examine the dead horsed mantra of “improving shareholder value”? Does their compensation reflect their ability to have improved shareholder value?
Actually another comment links to an article about:
“CEO Pay and Performance Often Don’t Match Up:
The S&P 500 CEOs who received the biggest pay increases scored middling shareholder returns”
I feel like that entire study is flawed because you can't just compare stock performances straight up.
You have to look at how the same stock would of performed with a different manager.
There are many factors outside of management's control that will dictate the return on a single stock. But don't confuse that with the fact that management decisions do have an impact and can make a large difference.
If they can't control a substantial portion of the downside risk, they shouldn't be allowed to take credit for the full upside, either.
The problem with the executive compensation ratchet of the past few decades is that it is completely divorced from any actual measure of C-level impact. If things go bad, not their fault - if things go well, it couldn't possibly have happened without these strong leaders at the helm.
Who said they don't? Who says those stocks wouldn't have performed considerably worse without good management? That's what I am getting at. Just because a stock goes down does not imply bad management or vice versa. But again that doesn't mean that management decisions don't matter, they can matter a lot.
Amazon and FB are not the norm, especially FB which is controlled by one person. These are tech companies trying to win market share in emerging sectors, and pulling the plug when they fail to get a foothold. Amazon created an entire industry (Cloud) that it's the dominant player in, totally tangential to its main business as durable goods retailer with this strategy, and it's the company's main profit center now.
I can't imagine a shareholder in either company also thinking you know...these guys at the top of both companies have been paid too much, the various right and wrong decisions they've made turned Amazon and FB into the 4th and 7th most valuable pubicly traded companies in the world in 20 years. They should have paid their c-suite half and become what? Still the 4th and 7th most valuable companies in the world? We know this why?
At the end of the day it's a very hard job, and no one has any idea who the hell is good at it. Prior performance is a good signal, but who knows really? Why would you go cheap when the potential for billions of dollars in wealth destruction/creation is at risk?
If you are able to deliver a better result than "Person X" who is paid more than you, and if you get a chance to deliver that result, won't you demand to be paid more than the "Person X"?
And for the company who is paying, who already seems to agree to pay that much for "Person X"'s result - would likely to be happy to pay you the same or more since you are delivering more
Where am I wrong? Isn't this just capitalism? Help me understand :)
If you voluntarily say I need only half the pay of "Person X" aren't you basically being charitable or just sacrificing what you could potentially get? I am not saying that doing this is wrong (probably morally right) but this is probably rare.
You don't seem to understand that there is nothing preventing mediocre applicants from asking for more money than better applicants. How much a person asks to be paid may or may not have anything to do with their actual ability to deliver results. And in fact, what has been empirically shown is that applicants who ask for and receive outsized compensation are actually worse performers on average.
The problem with this is that it presumes there's significant actual skill being exercised at the top level that is unique to the very wealthy who already make up most executives.
Note, I'm not saying "being a top exec takes no skill"; I'm saying "many people have the skills required, they're just rarely given an opportunity to demonstrate them in the same way." (I'm also saying "many execs do not have any significant skill to bring to the table; all they have is connections and money".)
Essentially, you're repeating a variant of the Just World hypothesis—that people who have skills that are relevant to high-paying jobs must be highly-paid, and people who are highly paid must be skilled enough to warrant it.
Neither of those propositions holds up to actual scrutiny.
I don't think he is disputing your claim that there are many people with the skillset to run Netflix that have never had the opportunity to demonstrate it.
The problem is that if they have never had the opportunity to demonstrate it then how do you find them in the first place?
+1 to everything you say. Actual scrutiny will probably yield more optimized results that costs less.
Some of the variable factors that will make the actual scrutiny extremely hard are human emotions such as desire, ambitions, ego, time, impact to morale [employee, shareholder, customers]
No the board is just lazy and has no real plan for if the CEO keels over.
Imagine if how long it takes the board to find a replacement CEO was how long it took to restart a failed server ... They just don't have contingency plans and so they shovel money at the CEO to ensure that the fact that they don't have a contingency isn't a problem.
If the CEO changes often the media will quickly portray that as the biggest problem - "The company that cannot find a CEO that will stick" and the shareholder value will be destroyed.
I completely agree that the whole thing is influenced heavily by how its going to "look" - perception.
But being in a Disney situation where your CEO (Iger) wanted out and choose a poor replacement for himself. (Note: Iger choose a poor replacement not the board, they're useless). And now Disney stock is at the same value in 2023 as they were in 2015.
If the Disney board actually had a plan on who a replacement CEO should be they wouldn't be in this problem.
Of course you can. People that get highest salary are best at one thing. Getting highest salary, that's their job and they're amazing at it. Their actual performance doesn't matter. They can destroy the company and next one will hire them for even more. There are numerous examples.
Because a few bucks compounded by the marginal next best CEO might be a major improvement for shareholder.
The real reason boards don't cheap out is because no one has ever[1] got fired or sued for paying top dollar for the best when things go to crap and everyone else is pointing fingers
"it's to retain talents"... except most of these people sit on the board of each other's companies and vote each others outrageous compensations... retaining talents my ass...
The big question is why do other societies (I'm not American) not value engineering. And when I say "value", I mean "with money".
Some professions push society forward and create long-term wealth. In my mind these are professions where you make decisions with skin in the game, persuade others to do things a better way, and all of STEM. Leadership, sales, engineering, science.
Other professions exist to describe what these prime movers do, or to maintain their work, or to support the people doing it. This is also vital and every society needs this too, but it's just not as important.
So, if in the USA they pay engineers 3x better than in other countries, the question is: what the hell is the rest of the world thinking?
Countries like India, China, Israel, and South Korea also have tech industries that can pay EU level salaries (and in Israel's case US level) despite a cost of living comparable to Eastern Europe (excluding Israel).
The reason is those counties and the US have an oversized software+hardware industry with a very mature VC+PE+IPO market within the tech sector or a pipeline to the US's financial sector, and are thus able to make 8-9x multiples of revenue based on a single IC.
Most of the EU doesn't have software+hardware companies with comparable revenue multipliers. That said, in certain niches (eg. Pharmaceuticals, Finance, Defense) in some regional employment markets like those in the UK, Denmark, Netherlands, and Ireland might be able to offer US comparable salaries (not SV level but a decent $70-100k base)
> what the hell is the rest of the world thinking?
— “Who wants to work that hard for nothing?”
— “We’re a tech company? What do we actually do? Something that: atomizes social relations; enables the violation of people’s privacy and rights; or simply plays hot-potato with funny money? Yeah, pass. My friends and family would think I’m a chancer.”
— “What you’re doing goes against local laws and ethics. You can’t do that here.”
— “A business should help the country and its people; not the people that built it.”
— “Spending all my free time to become marginally more knowledgeable and skilled than my coworkers/‘competition’? I’d rather spend time with my friends and family — or a hobby.”
— “Money? What am I gonna do with money — buy a house? Then what.”
STEM professions are important, but I disagree that they're not valued enough. If anything, the US is overvaluing them compared to the rest of the world.
Education and health professionals are much more valuable to society, and it's criminal how little they're paid in general. Sure, they ultimately depend on STEM fields, but without them our societies would literally collapse. The "prime movers" as you put it depend much more on health and education professions than the other way around.
We only need teachers because they generate STEM grads. No science would mean 90% of the value in education is gone. There's obviously value in learning history and English, but it's nothing transformative.
Until recently, the medical profession was literally leeching people until STEM stepped in with germ theory etc. The life expectancy value of going to the doctor was negative!
The US pays salespeople, leaders, entrepreneurs, and engineers a ton of money. And it shows in the results.
> We only need teachers because they generate STEM grads.
Only? No professions would exist without teachers. Education is fundamental to our society, and has been for millenia. There's nothing more transformative than a good education.
> No science would mean 90% of the value in education is gone.
Again, I'm not saying that science is not important. It plays a critical role in driving other fields forward. But I'd argue that an average teacher and health care worker are more valuable to society than an average IT professional, while the discrepancy in pay between them is abysmal. We only care about health care workers in times of crisis, but then quickly forget about them when it's not trendy to call them "heroes" anymore.
> Until recently, the medical profession was literally leeching people until STEM stepped in with germ theory etc.
I'm not talking about scientific breakthroughs that push other fields forward. Those obviously deserve the merit and recognition they have received. I'm talking about the value of the average working class professional in these fields, and their relative salaries.
> The US pays salespeople, leaders, entrepreneurs, and engineers a ton of money. And it shows in the results.
What results? How is a software "engineer" working for an adtech or social media giant to build spyware valuable to society exactly? Or yet another startup peddling their bullshit product designed to lure in investors and make their shareholders rich? Or the sleazy sales people making all those deals happen? You're telling me that this is somehow more valuable than health workers literally saving people's lives, or teachers building future professionals?
One group lives in luxury, while the other can barely make ends meet working a much more stressful and laborious job. This shows in the results, alright.
Thinking that somehow our profession is more important is indicative of the tech bubble we're in. But I'm not surprised to see such mentality on this forum.
I love how STEM has basically just been reduced to TE (and maybe M, but it’s more of a tangential thing) colloquially. My understanding that the “S” in particular are not very valued, and that there’s way more supply than demand in most of the sciences.
My salary is decent, but our family paid $48k out-of-pocket for medical care last year, and our kids enter college soon; some colleges in the US are over $60k/year now. In Europe, my salary would be lower... but so would my medical and college costs.
$2400/month premiums ($2800 this year), $4k in copays (capped), uncovered compounded medications, an out-of-network provider because the in-network ones have a year's wait, dental/braces/vision, etc. (Plus mileage/parking incurred with a medically complex family.)
If your base of comparison is Berlin, then Tier 1 metros in the US can come out to 3-4x as expensive, but Germany also has pretty bad wage stagnation so ymmv
I know this is supposed to be a "self-awareness jab" at HN commenters, but you should really take a look at the stock market. 7 of the top 10 companies by market value are American tech companies. If anything, American IT workers are severely underpaid compared to the profits these companies are raking in.
These companies are raking record profit because they've managed to place themselves as de facto monopolies in their respective areas. The software world is a winner-take-all in nature, where the last man standing becomes a super profitable monopoly (SV prefers the term "the moat" instead of monopoly). It has little to do with the workers of these companies and everything with the lack of regulation of the tech sector.
But that means the work being done at those companies is more valuable than the work being done elsewhere, and so it makes sense that those companies would pay more (because marginally better employees will add even more value than they cost, due to the org's over-size leverage of that work). That in turn raises salaries for all workers in the same market.
That very well may be true, but I would rather the workers still get paid concomitant to the profits the corporation is raking in rather than even more wealth being accumulated by the capital class running these corporations.
I think you mean well. Though this comment does remind me of situation during Silicon Valley Bank collapse. Many startup founders were shocked to discover how large part of America hate these hardworking entrepreneurs for no fault of theirs.