No. of Recommendations: 35
I would say that there are vanishingly few executives worth more than (say) $5m/year for the work they do in their day jobs. The rest of the pay is because they can get away with it--it's not much per shareholder, everybody else is doing it, and there is a myth that bigger companies need more expensive bosses.
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To be clear, I would submit your claim above is that JP Morgan could go out and easily hire someone for $5Million a year which replacement would not reduce the earnings of JP Morgan by even as much as 0.01%. Or that once JP Morgan and accomplished that feat, that this individual would not be offered 10X or even 100X of his $5Million compensation at JPMorgan by other companies to be their CEO.
As it happens, Mr Dimon was one of the people I had in mind when I said "vanishingly few" rather than "one". I haven't actually followed his career that closely, so I don't have a good feel for how much the success of the firm has been the result of his personal efforts versus the efforts of the other top executives, the other 300,000 employees, or the fact of what position they hold in which industry. I have heard good things about the fellow's skill so I allow for the notion that his efforts have been important. Normally the bosses of successful already-large firms are simply the people who happened to be marching in front of a parade rather than leading it.
There are *lots* of very smart and capable people out there. The myth of the rare genius is very much over hyped. Yes, there are a few exceptional outliers...but not many. It would be silly to start with the notion that the CEOs getting the most pay are worth the most pay, (or that the CEO ought to be the highest paid person in a firm), since skill in the CEO role is such a vanishingly small part of the process of getting to be one of them. As but one random example, if you don't found the firm yourself, you better be tall if you want to be in charge. Psychopathy helps a lot, too.
Does anyone seriously think that it wouldn't be possible to get a more competent boss at Meta for $5 million a year? The clue is in the company name.
As a reminder of the ease with which one can mistake the success of a business for skill of the boss, remember Mr Buffett's warning: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” Think deeply about WHY that is so...the economics of the business are utterly dominant, not the actions of the boss. Believing otherwise is usually a bit of flimsy "post hoc ergo propter hoc" reasoning.
Jim
