
Peter Thiel: Startup CEO Salaries Shouldn’t Be Above $150,000 - jnazario
http://pandodaily.com/2012/04/19/peter-thiel-on-ceo-salaries-and-motivational-indicators/
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lpolovets
I don't understand the example of Reid Hoffman taking a $15k salary as CEO of
LinkedIn. IIRC, Reid was pretty well off from from being a very early PayPal
employee and board member. When you have $X million in the bank (X >> 1), do
you even care if you make $15k or $100k or $250k per year?

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larrys
I agree it's window dressing and almost meaningless to me. Steve Jobs taking a
$1? So what? He has money already and is trading that for future upside. And
actually for the thrill of making his vision a success. My guess is that for
many people (and especially Jobs) he could be paid $4 million and that
wouldn't change his commitment to Apple.

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larrys
"...Thiel believes that a CEO should not be paying themselves more than
$150,000, even after a Series A investment. Anything above that shows a lack
of motivation to the company and to the future success of the company."

Anything above? Really?

This assumes a few things. First that the cost of living is the same for any
CEO. A CEO at a startup in NYC or SV has considerably higher cost of living
than a CEO located in many other places.

Second, what if the CEO of the startup is older, has 9 children and expenses?

Coming up with an absolute number like "$150k" or whatever doesn't take into
account a particular persons circumstances and seems to be biased toward
unmarried people or people without children with no other obligations.

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philwelch
Most people with kids and mortgages get by on less than 150k. If you really
can't make ends meet on 150k you've overextended yourself.

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earl
Not in sf or nyc.

a low end (not dumpy, but definitely not high end with a doorman) 2 bed
apartment is going to run you $650k in the decent bits of sf and more in nyc.

In sf, you end up paying approx $1100 per month per million dollars of value
in property taxes. So $715 in taxes, $300 or so in insurance, a $2500
mortgage, and you can easily be spending $3500-$4k/mo (after taxes) on
housing. Using the rough rule of thumb that your salary should be 40 times
your monthly housing payment, that's $160K already.

It isn't hard if you're an adult, with a family, or housing obligations, or
kids, etc. If you wish to restrict the universe of ceos to relatively recent
college grads with no life obligations who are content to pay $1500 to share a
crappy apartment, then maybe Thiel is being reasonable.

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_delirium
>> Most people with kids and mortgages get by on less than 150k.

> Not in sf or nyc.

It's still trivially true that most people in SF and NYC, including married
adults with families, get by on way less than $150k. Even Upper-East-Side
Manhattan, one of the wealthiest zip codes in the U.S., has average incomes
"only" in the high 5 figures. Maybe there is a small section of Nob Hill where
$150k incomes are normal, but even in most nice parts of SF that's not a
typical family's income.

Part of the reason is that in areas where housing is the major cost, the
40x-your-housing-cost rule of thumb is too conservative, and would lead to a
conclusion that almost nobody can actually live in the city, whereas clearly
many people do. And anyway I believe the usual mortgage-company rules of thumb
are 30% of your gross income on the mortgage payment itself, but up to 40% on
mortgage+insurance+etc. So that'd lead to $120k in your hypothetical.

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vaksel
NYC is a bad example, the real estate costs really sky rocketed over the past
25 years or so...so it's very possible that someone could have gotten one of
those buildings on a $40K/yr teacher's salary.

Good luck doing that in this day and age

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larrys
As a matter of fact I dated such a person (UES of NYC). Her salary was, IIRC,
actually about $80's. She was divorced with one child. They had a 1 bedroom
and shared the same bed. And she wouldn't have been able to afford that
without family help.

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tlogan
Can we also have rule that VC salaries should not be more than $150K? And they
will be paid only from funds profits and there will be NO management fees for
their funds?

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angersock
Let's not be silly here. If it weren't for VCs doing all the hard work, what
would ever ship?

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1123581321
The CEO's salary should be the amount that maximizes the startup's chances of
succeeding.

For a young/single or independently wealthy founder that's as close to zero as
possible.

For a founder with family (like me) that's the lowest amount that puts all
concern about supporting his/her children out of mind, so the CEO can focus.
That number can really range.

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emmapersky
~95% of Americans individual income is less than $100K [1] and while there are
sadly many people living in poverty, that the other end of the scale. $150k a
year is more than enough for a multi-person single earner family, you just
might have to forgo that penthouse with a Central Park view for something
that, shock horror, is in the outer boroughs. You know, like most New Yorkers.
(I'm sure there is a similar analogy for SF and East Bay, or something)

So, have some respect people. Stop acting like spoiled children. Oh wait.

[1]
[http://www.census.gov/hhes/www/cpstables/032011/perinc/new01...](http://www.census.gov/hhes/www/cpstables/032011/perinc/new01_001.htm)
via Wikipedia

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danw
This. In your 20s and earning more than £20k? Well done. Now shut up and ship.

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kposehn
Ehhh, $150k is a rather broad generalization.

I'd say that a startup CEO shouldn't make more than mid/senior level
engineers. This allows food to be put on the table and some decent quality of
life, while not sucking cash away at the expense of growth.

At the same time, if you're capable of not taking a salary _at all_ , I think
it is wise.

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amorphid
Making blanket statements about how much people should make is fairly
pointless. If spending $X on a CEO is a clear value proposition for the whole
company, X can = just about anything.

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rbanffy
I'd contend CEO salaries shouldn't be much above that. If you limit
compensation, it may be hard to hire people like Leo Apotheker, Carly Fiorina,
Stephen Elop or the RIM guys. OTOH, there are people who can do the job as
well as, if not better, than them for a fraction of their cost to the
companies they run.

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bdunn
I never really understood this idea of positions (especially the owner/CEO)
being pegged to an arbitrary salary figure.

If profits are good, reward yourself. Any smart business owner gets the long
term rewards of reinvesting in the company and will likely do that where
appropriate.

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jtchang
Thiel is missing the point. The point is that you need to pay people enough so
that money ceases to be a factor.

For certain people money is not a factor so it doesn't matter whether it pay
them $1 or $1MM. To others $150k is just enough money to live very comfortably
but not enough to do nothing.

Buffett once commented, "I want to give my kids just enough so that they would
feel that they could do anything, but not so much that they would feel like
doing nothing".

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rollypolly
You can put any sort of artificial limit on CEO salaries. The only thing
you'll never be able to touch is their true source of wealth, which is stock.

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viscanti
That's the whole point though. You want the CEO to be able to live
comfortably, but you want her hungry to grow the company. Having the bulk of
her assets in stock, which is worthless until the company is a success, aligns
the interests of the CEO with the Investors. Startup CEOs are more savvy than
ever about retaining equity. It should be clear that their path to wealth goes
through building a successful company, not just waiting it out until they've
used up their runway.

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alphakappa
If they have no money for the present, and the only possibility to make some
money is to have an IPO or sale, then the CEO is not necessarily aligned to
the long-term interest of the company.

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viscanti
There's a big range between "no money for the present" and some salary at or
below 150k a year. The point is that the CEO shouldn't be "getting rich" from
their salary. They should be able to live comfortably, but not necessarily
extravagantly (anything over 75k a year in SF or NYC should really suffice).
If the CEO has aspirations of some day living extravagantly, she needs to have
a successful exit.

It sounds like you're arguing that an "under paid" CEO might push for an exit
quicker and at lower value than they might otherwise, if they had a higher
salary. Almost every exit is successful, and not at all a guarantee. A CEO so
short sighted that they take a much smaller early exit, probably is short
sighted enough to fail at running a business and will likely end up with no
exit at all.

As long as the CEO can pay for rent, food, family expenses and has at least 1k
left over for whatever each month, that's more than enough. If a startup CEO
is making a million a year, there's not as much incentive to get to a
successful exit. Instead, there's more incentive to keep things going as long
as possible to milk that salary. Reducing salary to a reasonable rate (I don't
think anyone here is advocating ramen and a sleeping bag under the desk) and
keeping incentives tied to a successful exit keeps the motivation where it
needs to be.

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epicureanideal
I think it makes more sense to say something flexible like, "startup CEOs
should not make more than 2x their market salary". I say 2x because they might
be working twice as many hours. I'm not saying they should get 2x, because
that's an argument about whether they should be working harder for equity or
for salary, but I think 2x market salary is a reasonable, hard to argue with
cap.

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spobo
I'm blow away by the reactions here. It's as if everybody expects to make a
lot of money while taking a lot of risks with other people's money. This isn't
wall street ;o This is business and hard work.

You get paid when your business is successful and you are acquired. At least
that's how VC's see it.

If you don't go to bed with VC's or external investors you can pay yourself
whatever you want.

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waterlesscloud
Of course, this would have the handy side effect of exerting downward pressure
on engineer salaries as well. Huh.

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michaelochurch
The reason this makes me sick has nothing to do with the number. I think that
number is more than reasonable for most cases.

No, the reason it makes me sick is that VCs and three-digit millionaires and
billionaires really should stop copping this attitude. We get it, you guys
don't need generous salaries, or salary at all.

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mjwalshe
Actually the 1$ salary is a well known tax dodge - its a aggressive way of
avoiding income tax - everyone will have there own take on what this says
about them as an individual.

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michaelochurch
It's not exactly a "tax dodge". It's a consequence of the fact that capital
gains taxes are lower than the income tax. It's a problem with the game, not
the players.

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mjwalshe
Well as a small shareholder/investor id be realy realy Pissed off if the IRS
clamps down on my valid lower CGT just because some billionare CEO is taking
the piss to be blunt.

