Home / General / CEOs require astronomical compensation to incentivize great performance. And mediocre performance. And bad performance.

CEOs require astronomical compensation to incentivize great performance. And mediocre performance. And bad performance.

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CEO compensation is determined by a cartel, not any kind of “free market,” and as such it’s a “heads I win tails I win even more” proposition:

Boeing had a historically bad 2020. Its 737 Max was grounded for most of the year after two deadly crashes, the pandemic decimated its business, and the company announced plans to lay off 30,000 workers and reported a $12 billion loss. Nonetheless, its chief executive, David Calhoun, was rewarded with some $21.1 million in compensation.

Norwegian Cruise Line barely survived the year. With the cruise industry at a standstill, the company lost $4 billion and furloughed 20 percent of its staff. That didn’t stop Norwegian from more than doubling the pay of Frank Del Rio, its chief executive, to $36.4 million.

And at Hilton, where nearly a quarter of the corporate staff were laid off as hotels around the world sat empty and the company lost $720 million, it was a good year for the man in charge. Hilton reported in a securities filing that Chris Nassetta, its chief executive, received compensation worth $55.9 million in 2020.

It’s the nicest racket.

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