Brian argues CEO pay should be tied to net worth, not peer benchmarks. Restricted stock units replaced options that encouraged risk-taking, and a $20 million package means nothing to billionaire founders like Elon Musk. Performance shares tied to personal wealth would actually align their incentives.
Chapters
I do want to kind of stick on that. You said your net worth went from X to 100X. I think an element that we chatted about, texted about before, Brian, that not enough people are talking about is actually kind of the package that's in place also for Dylan, which is obviously kind of this kind of $2 billion moonshot-like grant, kind of Elon Musk style. And Brian, we were saying that we don't talk enough about CEO comp. I wanted to— why don't we start with you, Brian, on this, given you're the best person here to speak about it. How do you think about this and how do you analyze that?
Yeah, I think CEO comp is pretty broken at the moment, and there's two things that I think are pretty broken about it. The first is just everyone really relies heavily on RSUs. And when I grew up in the industry, I hate to be that guy, be like, I'm back in the old days. It was mostly ISOs. It was options until 2006 and regulations changed and the expensing of that changed. So the world kind of moved to RSUs. It just creates sort of a risk-averse behavior in the CEO. Like, it's basically cash comp, goes up and down a little bit, let's say. But in ISO, you're swinging for the fences. Like, you've got a strong incentive to swing. And so it's really had a dampening effect on the risk-seeking behavior of a CEO that I think more companies should want. And I— it's kind of pervasive across the industry. So I don't like this RSU comp thing. That's the first problem I see. With all this stuff. The other problem with comp is almost every company looks to CEO comp, and, and the way it works behind the scenes is, you know, HubSpot's got a compensation committee, everyone's got a compensation committee, and HubSpot wants to pay the CEO, let's say, at the 75th percentile of what her peers make. And so we look at 20 different peers of similar size companies, Atlassian, blah, blah, blah, blah, and we peg her at that 75th percentile. Which in her case is, you know, it's $20 million, a lot of money. Now, if you did that for Dylan, which would be in our comp group, similar market cap to HubSpot, he'd make $20 million a year. But if you think about it, that's less, that's like 0.3% of Dylan's market cap of his own personal net worth. It doesn't move the needle an iota. It doesn't matter at all to him. And so you have to get kind of creative. And so I actually, like what they did with his comp. They used PSUs very heavily, not RSUs. And I like the idea of not pegging your comp to your peers, but you kind of have to peg the comp to the network. Same thing with Elon Musk. Like if you paid Elon Musk like Mary Barra, Mary Barra makes $29 million a year. You think Elon cares about $29 million? So you have to kind of comp it to the CEO's net worth as opposed to just the peers. So that's what I like about this.
