alt Hacker NewsCEO leaves, stock market value drops ~$6.5B
One interpretation is that senior leadership (e.g. CEO) matters a lot. But it flies against the idea that CEOs are overpaid. From a quick search, it looks like his total stock comp was ~$52m which was a bargain considering his departure cost the company billions. Perhaps he would not have left if he had a higher pay, more in line with the value the market ascribes to him.
However I imagine those that are upset about CEO pay will find this unconvincing. Is there any other way to interpret this?
Replies
>it looks like his total stock comp was ~$52m which was a bargain considering his departure cost the company billions.
this same things can happen with any employee at any company and does not bolster your argument.
a $10/hr worker flipping burgers can take actions that cost hundreds of thousands of dollars. burger king foot lettuce guy probably cost the company millions.
i could cause millions of dollars in damage this afternoon (i am not paid millions).
Another reading is this: CEOs don't quit without notice [1], it's bad form and bad for both the company and for the reputation of the person leaving. Regardless of the value he as an individual was providing it speaks to substantial disfunction in the overall leadership of the company and a major lack of confidence from the person who presumably had the best idea of how the company was doing on the whole. The market suddenly learning those things resulted in a substantial market correction. It doesn't really matter whether he was a particularly good or bad CEO; the situation would indicate something is majorly wrong in either case.
1: Obviously exceptions will exist for unexpected major life events, etc.
You made the assumption that it was fairly valued before and the loss was a "true" loss.
But possible it could have been over-valued before, unbeknownst to low-information external investors. After all, right now it as a PE of 450+. (Google PE is 17, Meta PE is 27, Tesla PE is 330)
The stock dropping on CEO departure had nothing to do with his personal performance, and everything to do with the information that he revealed on the way out. Why would the CEO leave a rising and successful company on the verge of innovation?
And thus tying it back to pay - people should be paid based on their output and their personal performance, not based on simply serving as a signal which any warm body can do. That said, I don't think truly amazing CEOs are overpaid, e.g. steve jobs of old.
Er, I'm not sure what exactly you're getting at, but the stop market drop was not because of his value-add to the company, it was because of the signal it sends by the CEO quitting.
So… I guess you could make an argument that that merits higher pay, but it'd be saying it's due to his blackmail power.
How much of the drop do you think is due to the bearish nature of ceo departure? One would have to assume that if the company was going to go gangbusters the ceo would stay.
In short: is it this particular CEO who is that valuable? Should I pay 100m to some Joe off the street since I know they will stay put?
Just because the market reacts to a piece of information to the tune of 6B, doesn't mean the guy is providing 6b of value. It's just a piece of information and the market reacts to what it may or may not mean. Any other goober with an MBA in that role who quits with no notice may induce the same market reaction, even if they were a shit ceo.
> However I imagine those that are upset about CEO pay will find this unconvincing. Is there any other way to interpret this?
I would argue that at most he's a signal about company value that people reacted to. Maybe the company lost 6 billion dollars in underlying value, but it wasn't from the CEO change itself.
Trading algorithms at big shops read headline "CEO of company leaves for greener AI pastures"
Make adjustments based on ML
Actual analysis of this person's value to company not weighted as highly
>Is there any other way to interpret this?
One would be "the market processing the new information that MongoDB's legal department doesn't know how to draft contracts".
ole Zuck just buying what he wants - for any price, cause that is what the richest in the world can do? Also using the market cap / paper valuation isn't aligned with 'actual value' imo.
> Is there any other way to interpret this?
Sure: Destructive actions have a lower bar than constructive ones.
My company doesn't pay me millions, but I were motivated to do so, I could probably cost my company millions. Similar principle here: regardless of whether the CEO is any good, simply by virtue of their position they can tank the stock by making wild moves that undermine confidence.
Imagine a generic human blob CEO with minimal VORP[0], you could swap him out with anyone else in the organisation and get the same results. But if he gets on twitter and announces, "This company is trash and I'm leaving this trash fire," he's going to cost them millions.
[0] https://en.wikipedia.org/wiki/Value_over_replacement_player
> However I imagine those that are upset about CEO pay will find this unconvincing. Is there any other way to interpret this?
Judging by your recent comments, you seem to have an axe to grind with people who are "upset about CEO pay" and I don't think it's possible to convince you to look any things from any other angle.
A CEO abruptly resigning is read by the market as a signal. Unless you think this person is ~$6.5B more valuable than any potential replacement, the full quantity of the loss cannot be ascribed to the value he provides as an employee.