"CEOs at large companies make a tonne of money. This is usually justified by saying that they are more skilled than the average CEO but this kind of skill is also hard to quantify. Why does this argument work for CEO pay but not programmer pay?"
Because it's much easier to measure performance of CEO's, at least artificially. If Google does well, then you (supposedly) know that Larry Page is doing well. That's how the market treats it, at least. But can you really tell me that you're able to tell me which of the 10's of thousands of engineers that Google has is responsible for that success?
Also, there's the issue of leverage. Just like a programmer can build software that is used by millions, and therefore has a lot more leverage and creates more wealth, so a CEO usually influences even more customers than the programmer. Paul Graham has an article about exactly that - the idea of a startup is to give e.g. programmers a lot more leverage than they usually have.
And arguably, the fact that a few engineers can build WhatsApp and earn billions is an example of that in action - getting more leverage by building a company, proving success, then gaining the money it gives. But the average exceptional programmer, while being 10X better at programming, won't necessarily also be better at business or money generation, etc.
Lastly, the fact that there are cases of companies colluding to keep pay down proves the opposite of your point - that salaries should have been even higher!
|Because it's much easier to measure performance of CEO's, at least artificially. If Google does well, then you (supposedly) know that Larry Page is doing well."
Originally I wrote a much longer reply but after re-reading it it came across as much more anti CEO compensation than I intended. I don't view short term market movements as an accurate reflection of company or CEO performance. If you willing to use easy to calculate but broken metrics I can supply a few for programmers. How about lines of code? This also ignores under performing executives getting big salaries and severance packages. No one is going to pay me millions if I get fired.
"And arguably, the fact that a few engineers can build WhatsApp and earn billions is an example of that in action"
I view employment at a startup like buying a lottery ticket. Someone is going to get a large payday but that doesn't mean they're better than someone that doesn't get one. Even with the possibility of a big payout your expected return is pretty low.
I think I stated the collusion argument badly so let me try again. If you're in charge of a major corporation and experiencing a talent shortage would you tell your HR department to exclude a large portion of the local candidate pool? That's what those companies did.
You raise interesting points. I'm honestly not knowledgeable enough to tell you if it makes sense to judge a CEO by the short-term, or even long-term, performance of their company. I don't think anyone really knows just how much is the correlation there.
What is clear is that, assuming CEO's do affect the value of a company significantly, they'll tend to affect it much more than even the best programmers, especially at a company the size of Google. That's just an issue of leverage. So a (possibly semi-broken) method of judging whether you made billions for the company will still spit out compensations of millions.
As for startups, I was talking specifically about the founders, not employees. And yes, I agree that startup's succeeding, at least on the Whatsapp scale, is very similar to a lottery. But smaller startups/consultancies can make much more money for the programmers who start them, who have skills that the market cares about more than just programming well.
Because it's much easier to measure performance of CEO's, at least artificially. If Google does well, then you (supposedly) know that Larry Page is doing well. That's how the market treats it, at least. But can you really tell me that you're able to tell me which of the 10's of thousands of engineers that Google has is responsible for that success?
Also, there's the issue of leverage. Just like a programmer can build software that is used by millions, and therefore has a lot more leverage and creates more wealth, so a CEO usually influences even more customers than the programmer. Paul Graham has an article about exactly that - the idea of a startup is to give e.g. programmers a lot more leverage than they usually have.
And arguably, the fact that a few engineers can build WhatsApp and earn billions is an example of that in action - getting more leverage by building a company, proving success, then gaining the money it gives. But the average exceptional programmer, while being 10X better at programming, won't necessarily also be better at business or money generation, etc.
Lastly, the fact that there are cases of companies colluding to keep pay down proves the opposite of your point - that salaries should have been even higher!