CEOs and Surplus Value

CEOs in larger companies make more not necessarily because they’re better than the people running smaller companies, but because there’s more excess value being made by their employees for them to soak up.

The elimination of middle management in the 80s and 90s didn’t result in higher wages for employees because upper management ensured the excess funds went straight to their pockets.

Maybe if we capped the size of companies at 250 employees we wouldn’t need to cap executive salaries?

Another way of looking at it: things that are common but essential to life, like bread, are cheap. Luxuries, like sports cars and CEOs, are expensive. We can’t do without the bread. We can get by just fine without the CEO.

Companies succeed not because of their CEOs, but in spite of them. If we apply the 80/20 rule to CEOs, then most companies have to be run by bad managers. So how do they survive? It’s because their employees are not crap, and care about their jobs (they’re actually under threat) and drag the company kicking and screaming into profitability.

We can see this in action in companies that have removed management: Valve, Github, etc. All power passes back into the hands of the workers, who are highly paid. With large salaries and a lot of autonomy, they produce incredible products.

Company management, like government, succeeds best when it creates the infrastructure necessary for employees (a company’s citizens) to do well, then gets out of the way.