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CEO cuts his pay by almost $1M to give his employees big raises

latimes.com

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Re: CEO cuts his pay by almost $1M to give his employees big raises

#21

Post by chatmasta »

nearmiss wrote: post #6
chatmasta wrote: post #4

Ten bucks says gravity payments will be for sale within a year. This is an obvious PR ploy and I'm surprised HN is vulnerable to it.

Great! Here's hoping the PR pays off. Imagine if other companies noticed it was a net gain to do this sort of thing and the practice picked up steam (unlikely/impossible I know). The horror of it all!

The problem is it's unsustainable. The employees aren't providing $70k of market value. The CEO is changing his pay to attract attention and build customers. Companies are not going to adopt paying 2x market salary as a standard business practice. If people will work for $40k then that's where the costs will "gravitate" (hah) to.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#22

Post by AC__ »

Imagine where our species would be if all efforts were contributed to betterment of society. Right now the missing piece to researcher A's puzzle is sitting on researcher B's bench because company X hasn't figured out a way to extract profits yet. If we managed to move toward an Ubuntu(I'm talking Michael Tellinger not Canonical) contributionist social model we would make more technological advancement in 1 year than we've seen in the past 50, maybe even 100, years. CEO's coming to the realization there is more to the human experience than profits is just the start.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#23

Post by pc86 »

IanDrake wrote: post #9

Pay? Do thy mean total compensation or salary? There are too many stories of CEOs dropping their salary to $1 just to find out later they got huge bonus, stock, and option grants. I don't care how much CEOs make. I do care about the bogus self congratulatory PR stunts meant to dupe the heard into thinking this company is inline with their thoughts on "social justice".

Well he owns the entire company, so theoretically he could take a disbursement of 100% of profits if he wanted to. Realistically a large portion of that is almost always reinvested in the business. Besides, which one is "more fair" of the two options (from this story specifically):

- A CEO makes $1MM and owns 100% of a company making $2MM in profits every year.

- A CEO makes $1.00 and owns 100% of a company making $500K in profits every year.

Regardless of how large his profits disbursement is, he's intentionally putting himself in a worse financial position so that the majority of his employees get a massive pay increase in an expensive urban part of the country.

Just because it's a good PR move doesn't mean it isn't also a good move in general and a good move as a human being.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#24

Post by borgia »

bko wrote: post #8

This is a valiant effort but I wonder how the practical allocation of the jobs is determined. If the market salary for an employee is 50k, if you raise it to 70k, you will probably have a lot more applicants than positions. Do the current employees get grand-fathered into the job despite more qualified candidates? When hiring new employees, how do you decide among the increasing rank of equally qualified candidates?…

>a bump in pay will almost certainly help reduce costs associated with retention and retraining and may turn out to be a good business decision, not to mention the publicity.

I was thinking about this when reading the article myself. It has to help retention as it instantly becomes less desirable to move company if the market salary is far below what your current company is paying, which is what this will do.

For the time being it's great for all involved. The employees benefiting from it should be careful in terms of how they adjust their lifestyle based on the extra income though, because if the company went under or there were redundancies or similar they are almost assuredly going to experience a significant drop in their earnings.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#25

Post by dragonwriter »

chatmasta wrote: post #21
nearmiss wrote: post #6

Earlier quoted context omitted.

Great! Here's hoping the PR pays off. Imagine if other companies noticed it was a net gain to do this sort of thing and the practice picked up steam (unlikely/impossible I know). The horror of it all!

The problem is it's unsustainable. The employees aren't providing $70k of market value. The CEO is changing his pay to attract attention and build customers. Companies are not going to adopt paying 2x market salary as a standard business practice. If people will work for $40k then that's where the costs will "gravitate" (hah) to.

> The problem is it's unsustainable. The employees aren't providing $70k of market value.

How do you know this? Sure, if you make the assumption that the before this one change, the world worked perfectly in line with the kind of simplifying assumptions that you might see in an Econ 101 class, then that would be true, but then, if the world worked that way, this raise wouldn't have happened.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#26

Post by pc86 »

AC__ wrote: post #22

Imagine where our species would be if all efforts were contributed to betterment of society. Right now the missing piece to researcher A's puzzle is sitting on researcher B's bench because company X hasn't figured out a way to extract profits yet. If we managed to move toward an Ubuntu(I'm talking Michael Tellinger not Canonical) contributionist social model we would make more technological advancement in 1 year than…

I think they've tried that in a couple places already.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#27

Post by officemonkey »

bko wrote: post #8

This is a valiant effort but I wonder how the practical allocation of the jobs is determined. If the market salary for an employee is 50k, if you raise it to 70k, you will probably have a lot more applicants than positions. Do the current employees get grand-fathered into the job despite more qualified candidates? When hiring new employees, how do you decide among the increasing rank of equally qualified candidates?…

Think about it: how much does the lowest paid staffer make there? 25,000? 30,000? These lower-paid staff will be very loyal, because they're getting a very significant and possibly life-changing raise. They're not going to quit on you, and they're not going to kill the golden goose.

Recruitment has real costs. Hiring and training, and dealing with the hiring mistakes you make, all cost money. Having a happy staff saves a lot of money, time, and headaches.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#28

Post by gopher2 »

chatmasta wrote: post #4

Ten bucks says gravity payments will be for sale within a year. This is an obvious PR ploy and I'm surprised HN is vulnerable to it.

You're jumping to negative conclusions and making cynical generalizations. I think this is actually pretty cool.

Re: CEO cuts his pay by almost $1M to give his employees big raises

#30

Post by ukigumo »

bko wrote: post #8

This is a valiant effort but I wonder how the practical allocation of the jobs is determined. If the market salary for an employee is 50k, if you raise it to 70k, you will probably have a lot more applicants than positions. Do the current employees get grand-fathered into the job despite more qualified candidates? When hiring new employees, how do you decide among the increasing rank of equally qualified candidates?…

Is there a direct correlation between higher qualifications and better performance and output? If having two equally qualified employees, is their salary requirement the only decisive distinction?

I think this experiment will have quite a few positive net outcomes (publicity, reduction of cost with recruitment and retention, etc) but on the longer run employees making 70k will automatically know that they are on the lowest pay scale so I'm unsure how that will work out.

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