Item — HN Reader

For reference, he cut his total comp for 2024 from $84.6 million to $79.1 million. That's 6.5% of his TC he gave up, and it wasn't a discretionary bonus. I wouldn't call this a symbolic gesture. Everyone here would feel a 6.5% cut to their TC.

I don't believe anyone would ask their boss to cut their already vested RSUs because of a mistake. Especially when those RSUs went up 50% in value.

Yes, there is no real punishment for CEOs anymore. That's why great leaders punish themselves. He beat his KPIs, looked at corporate output, and still rated himself as needs improvement. I respect anyone that does that.

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While a minimum wage worker would feel giving up $200, I wouldn’t notice giving up $1k-2k. While that’s less than 5 for me%, the utility of money diminishes as one’s money increases. I’m certain no one making >$50M feels any difference from another $5M-6M.

> That's why great leaders punish themselves

Is it still a punishment if you still end up with a higher compensation compared to previous year?

If you got "needs improvement" on your performance review and missed your target bonus, but the company's stock went up 30% meaning your total compensation still increased, what would you expect? Would you consider that to be a fair punishment?

The standard Nadella is setting is that cash bonuses needs to be determined by cybersecurity impact, and that expectation needs to be in every part of the company. So he cut his (non-discretionary) cash bonus by 50%.

He could've cut his stock package as well, but you're not going to work at a company where meteoric increases in the stock price can be clawed back if your performance was bad. People would freak out and ask if their stock would be cut if a cybersecurity incident occurred.

A "needs improvement" is a kiss of death for a normal tech worker. For him, it makes him look humble and deserving of the tens of millions he'll get anyway. Gosh, he might even brag about it.

Yes, why would it not be? It’s still skin in the game.

If we think it’s a symbolic gesture, which it may well be, it is still a gesture that most CEOs would not have made. Unlike most here, I don’t think with this he’s saying please punish me for wrongdoing, but more I take responsibility for this failure (which could have happened many levels below him) and will take the loss personally.

Sounds like HN folks would love for Nadella to completely reduce his salary compared to last year. I don’t know that I agree. I’d say, let’s see you do it.

> Yes, why would it not be? It’s still skin in the game. [...] and will take the loss personally.

Because there isn't any loss overall? His compensation went up 63%, what are these losses you're talking about?

If his total compensation actually went down, I'd totally agree with you. But it didn't, which is why I don't understand how this is seen as "great leaders punish themselves".

He would've had 5 million more dollars this year if he didn't ask the board to change the terms of his contract to give him less money.

https://en.wikipedia.org/wiki/Opportunity_cost

Yeah, so he would have gotten $84.1 million instead of what he really got, only $79.1 million. Imagine being a CEO yet so poor.

So if I’m hearing you right, it sounds like you’re looking for net loss to justify the statement that “good CEOs punish themselves”, a statement made by another HNer and not by Nadella himself?

He did take a loss but not a net loss, so it didn’t go far enough is what I’m sensing?

Thus it’s an empty gesture devoid of any commitments to improve?

For me when I see gestures like this, I’m like oh ok. At some level I know it’s symbolic but it still sends a good signal. It doesn’t scream hypocritical to me.

Please elaborate on how he feels his 6.5% cut vs. someone in the middle class. I think it would be a useful exercise to see if the situations are at all similar.

A Senior SDE at Microsoft makes ~~$332k/year~~ US$241k/year. Median income per person in the USA is $42,800/year.

https://www.levels.fyi/companies/microsoft/salaries/software...

You're solidly upper class if you work at big tech. Nadella isn't trying to lead people making $42,800/year where a 6.5% decrease in salary can literally be the difference in homelessness. He is trying to lead wealthy software developers where $20k is painful but not life-altering.

It's a bigger issue that the median American salary leaves practically no room for someone to cut their income due to performance. If the only way to survive is to constantly lie about your performance to get an extra couple of bucks, people will do that regardless of what the CEO says or does.

Ideally, we would live in society where everyone had slack in their compensation. This would let more CEOs lead by example.

Your link shows seniors making $241k, not sure where you got $332k from.

The point is, even people making $241k will feel a 6.5% decrease in pay astronomically more than someone going from $84m to $79m. At that level there is negligible drop in quality of life, and the concept of "cutting back" pretty much does not exist.

This is still a performative act, the intention is nice, but it's performative nonetheless.

Sorry, I had it set to Canadian loonies and got inflated numbers.

Economists assume utility of money is logarithmically proportional to the amount, so losing a certain % of one's wealth hurts the same at every level.[1] Nadella made $84 million and is worth $1.4 billion according to the internet. For a $20k pay cut to hurt the same as a $5 million one, you'd need to have a net worth of x where (5000000/1400000000)x=20000 -> x=$5,600,000. For a $2772 pay cut---which is 6% of the median US salary---to hurt as much, you'd need $776,000 in wealth.

The median net worth is actually more like $192,700. So Nadella would have to give up (2772/192,700)*1400000000=$20 million to feel the pain of the median American giving up 6% of their income. That's quadrice what he actually did give up, but it still wouldn't result in his TC declining, since his pay rose by $30 million this year.

[1]https://economics.stackexchange.com/questions/23952/is-the-u...

Someone making ~$80M who "feels" a 6.5% difference in TC is somehow doing the millionaire version of "living paycheck to paycheck."

> $84.6 million to $79.1 million. ... Everyone here would feel a 6.5% cut to their TC.

Snort! Yes I'm sure he's having to cut-back on eating out and is doing more coupon cutting to makes ends meet.

Can't buy Avocado toast anymore .. /s