« The Tyranny of Intermediaries published | Main | Spaces of Evidence website and seminar series »

February 23, 2014

Comments

Ian Christie

Very interesting and compelling analysis - thanks Will.

There is a large literature by now on the myth of the Transformational CEO. But it naturally makes no impression on the Nietzschean uber-class of CEOs who need to believe in their own hype. What is surprising is how little difference that data and experience have made to shareholders and board members and remuneration committees, who all keep voting to be taken for a ride.
Part of the trouble is a collective action problem among boards: the fear that dispensing with their Randian Superman creatures will simply mean that they will be snapped up by a competitor and might actually perform as advertised for them. See the case of Wayne Rooney at Manchester Utd, awarded an £85m deal after performing mediocrely for ages. The club would be far better off selling him and buying a lot of more loyal and committed (and better) players; but if they sold him, someone else would have him, and he might actually play for them as if his pay packet were justified.

Will Davies

Ian - I think you're still assuming too much rationality in amongst all of this. The idea that Man Utd keep Rooney, for fear that he might perform for someone else, suggests at least a grain of reason (a sort of Prisoner's Dilemma problem). I would suggest that the Rooney situation is the perfect demonstration of something far more rooted in a complicated mix of anxiety, hubris, fear, aggression, and not knowing what else to do. Man Utd are suddenly under-performing at football, so splashing out £85m on a very famous footballer represents a symbolic indication that they are still a big bad club. Whether this represents 'good value for money' or not is no easier to specify than whether spending 60% of GDP on saving the banks represented 'good value for money'. We're outside of the realms of plausible valuation here. I guess Veblen might be the go-to theorist for this sort of thing.

Slide_guy

No need for much speculation on this. Andrew Carnegie echoed the sentiment over 100 years ago in his essay Gospel of Wealth.

cfinkle

There a simple explanation for these amoral, above-the-law CEOs: they're sociopaths.

Tom F

Are professional athletes "sociopaths" for making 100 times as much as their teams' low-paid stadium staff? Nobody questions that athletes and actors deserve their earnings, because differences in their skill are so clearly apparent. The resulting 'war for talent' in sports or film surprises no one. Why is it impossible that being a CEO also requires some hard-to-find skills that are worth paying for?

Aguillon-Mata

Having a paycheck 100 times larger than my coworkers' does not make me a sociopath, but perhaps having a full understanding of that unbalance and fighting through lobbies, politics and media endeavors to maintain it--as CEOs do in this country--could be consider a symptom of sociopathy. By "a full understanding of that unbalance" I mean knowing not only the fallacy of "the philosophical anthropology of the 1%"--which might argue that "one is worth what's worth", as I recently saw someone saying in The Daily Show--but also its obviously unethical grounds and its corrosive effects in other people's lives. At the end, though, the label "sociopath" seems insufficient to address the problem. I've seen it thrown at the 1% more and more often, and it's starting to sound like a tantrum. I'd recommend to move on, to not satisfy ourselves with that false diagnosis--which actually works more as an accusation in this context.

About the Rooney example, I'd like to point out that big clubs like Manchester Utd often spend money not to improve their game but to feed their brand; Wayne Rooney is part of a brand. His performance hasn't been a priority for anybody in the club for years already. But as a celebrity--in the same way reality TV participants become celebrities by circumstantial means instead of merit--he means business. This is true for other juggernauts like Real Madrid or Bayern Munich--in soccer: sometimes their calls don't make sense on the pitch, but they do make business sense.

Good talk, everybody.

Richard Lyonn

>Are professional athletes "sociopaths" for making 100 times as much as their teams' low-paid stadium staff? Nobody questions that athletes and actors deserve their earnings, because differences in their skill are so clearly apparent.

Actually many people question whether these people deserve their earnings.

But even if they do, in what sense is CEO skill or talent apparent?

Many CEOs leave a trail of corporate wreckage behind them. If ROI is the true measure of value - and not self-justifying narcissism - then these CEOs are the last people you'd want to run a business you plan to invest in.

>The resulting 'war for talent' in sports or film surprises no one. Why is it impossible that being a CEO also requires some hard-to-find skills that are worth paying for?

Because there is no evidence that CEOs have any such skills. There are a few - very few - exceptions. Occasionally CEOs appear who demonstrate genuine innovation and leadership.

But many CEOs are *clearly* incompetent fools. They don't understand their businesses, they don't understand business in general, and they actively destroy value.

Tech companies are famous for hiring buffoons, paying them ridiculous sums, and watching shareholder value either plateau or crash.

This is why the Cult of Narcissism is so destructive: it's the exact opposite of what it claims to be.

Instead of promoting talent it promotes and rewards incompetence and self-important blather.

Instead of punishing failure it insulates mediocre individuals from the consequences of poor decision making.

At some point business has to grow up and start dealing with reality by becoming evidence-based.

The comments to this entry are closed.