A good CEO is a force multiplier. Every single employee (and investor) in the company benefits in ways large and small for having a great CEO at the helm, and would suffer for having a worse CEO. In this sense, for a company with 200,000 employees (wow, that many?) is it worth $330 to each employee to have Iger at the helm? Of course the employees aren’t bearing the whole cost, so how about a third of that? I would certainly pay $100 out of my pocket once a year to work for a “Legendary” CEO versus a mediocre or merely good CEO.

We know that, unquestionably, a bad CEO (or the wrong CEO for the type of company or the growth cycle of the company) can doom that company despite the best and most heiroic efforts of the other employees. That is reason enough to invest highly in finding and compensating your CEO.

That is not to say that the converse is true; that a fantastic CEO can make a company grow despite poor effort from the other employees.

We can’t even say for sure that a fantastic CEO can be considered “responsible” for the success of their hardworking company, although there is certainly plenty of anecdotal data which shows certain decisions were extremely prescient or certain strategies which paid off handsomely that were driven by a CEO despite widespread skepticism.

It’s also worth considering what the CEO compensation would have been had a company not been so incredibly successful. Performance based options aren’t worth anything if the stock never rises.

Personally, I think the equity model is very flawed, but better than anything else we’ve tried. Speaking as a solo founder, the idea that I start out as 100% owner doing 100% of the work makes perfect sense.

But then you earn some revenue, or raise funding, and start hiring. As a company grows its success is the result of massive amounts of work done by a large group of talented workers who are largely compensated through cash salary, and maybe get token amounts of equity in the company.

But throughout this process of growth, the original founders may not even work for the company anymore. They may have driven it nearly to death and been kicked to the curb. But could still own double-digit percentage of the equity, and as a result become wealthy on the back of the company they own.

Why does being the Founder entitle a person to ownership of all that value creation that comes later?

I imagine a system where equity shares are distributed/generated through some work-valuation model on a monthly or annual basis, and those shares are either sufficiently diluted by the new share issuance over time, or actually have some sort of expiration function built into them. In short, workers should be getting a significant fraction of the company in new share issuance each year, but that ownership should not be perpetual.

This ongoing dillution would have pretty significant issues however on the flip side of the equation, which is the share valuation to investors who have paid to hold shares in return for future returns or expected capital appreciation. No investor would fund your startup and allow the levels of dilution I think would be required to make the system more fair toward workers. I do wonder if it’s possible to address this with two classes of shares somehow.