This is the third time in a week that this article is posted on hn See: https://news.ycombinator.com/item?id=9371854 https://news.ycombinator.com/item?id=9375978 It seems to be a real hot-button to say the least.
The NextDraft effect ?
CEO cuts his pay by almost $1M to give his employees big raises
41–50 of 103 posts
Re: CEO cuts his pay by almost $1M to give his employees big raises
#42Earlier quoted context omitted.
> 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 .
Because they were willing to work for $40k.
> Because they were willing to work for $40k.
That doesn't mean that they weren't providing $70k of market value, unless you assume that (at a minimum):
(1) they were maximimizing their pay in choice of job, and (2) they had perfect knowledge of all the alternatives jobs that they could otherwise have obtained.
These are the kind of assumptions that are typical in Econ 101, but to which real humans do not actually conform, particularly the second.
Re: CEO cuts his pay by almost $1M to give his employees big raises
#43Given this is the fourth time I have seen this on the front page I think it must be worth it for the free advertising alone.
this is my second time seeing it, and i still dont remember the company name... soooo maybe not
Re: CEO cuts his pay by almost $1M to give his employees big raises
#44Pay? 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".
Then just ignore his reduced salary and focus on the raises he's giving the lowest paid staff. His salary reduction is "just" part of how he's paying for this in the short term.
The team as a whole becomes less sustainable. Profit margins went from 2m to 500k. That's a lawsuit away from being in the red. Is the entire team going to take pay cuts if profits aren't coming in? Does someone get fired?
I think those lauding this as a morally virtuous move aren't basing this on principle. Hiring 1 employee for 100k isn't better than hiring 2 employees for 50k assuming equal qualifications. The team with two employees will be more productive and stay in business longer than the competitor (who spends twice as much on everything and won't stay in business).
Re: CEO cuts his pay by almost $1M to give his employees big raises
#45What about options? Does the CEO get options that raise his wage to a height that is still unfair?
"Price, who started Gravity Payments out of a dorm room when he was 19, wholly owns and operates the company . . . " Besides, what is fair?
It's hard to define what is fair. If you're a CEO, your definition of fair will likely be different from a person working at minimum wage. In fact a CEO's definition of fair could be different from 99% of the population. People in advantageous but unfair situations will justify the situation, while people with the short end of the stick will do the opposite.
With wealth inequality higher than ever before, most people see a CEO's salary as astronomically unfair. Do CEO's really have some super power that a minimum wage worker doesn't have? Can one man's intelligence, good looks, charm, or physical strength actually be worth 1000% more than another man? Hard to say.
Although capitalism promotes incredible growth and works for the most part, there is a reason why communism became popular in many countries. It stems from a fundamental discontent about the definition of fairness and wealth among the proletariat.
So if you want the real answer to the question of "What is fair?" I would say "Ask the majority."
Re: CEO cuts his pay by almost $1M to give his employees big raises
#46Despite the feel-good angle on this it is a horribly bad and irresponsible decision. Now, if they only have a couple of people doing just below $70K it is a dishonest yet clever marketing move.
It is a violation of a CEO's fiduciary responsibility to pay significantly more than market value for anything. That includes salaries.
Example: CEO announces the company will pay double for all office supplies. Desks, chairs, computers, etc., the company will pay double market rate.
How quickly would he or she get fired?
How many people would immediately conclude he or she was irresponsible or nuts?
Right.
Re: CEO cuts his pay by almost $1M to give his employees big raises
#47This 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 sav…
I also wonder if this company even has low paid staffers. The business I work for doesn't directly employ anyone under ~60k. Instead the kitchen staff, the cleaning people, the mail room, document processing people, etc. etc. are all contracted out.
Re: CEO cuts his pay by almost $1M to give his employees big raises
#48This company is not big enough to generate that kind of media attention organically, which tells me they made it into a press event. In that sense it rings hollow because it is clearly a publicity stunt. I think this is a general issue with all of these activities, and really any activity in a company, that you shape the message that you want to send to the world rather than there being an accurate representation of…
If the effect is that
1. he'll actually take $50,000/year in direct salary, and
2. that all of the call center etc. employees got bumped up to $50k/year immediately, and
3. that, as the article states, it indicates cutting profit from 2MM to 500K,
I don't know that I'd call it a publicity stunt.
Re: CEO cuts his pay by almost $1M to give his employees big raises
#49Earlier quoted context omitted.
> 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 .
Oh come on. I can't figure out whether you're feigning ignorance or whether you really didn't pay attention in Econ 101. Basic economics certainly does not claim that every product will be sold at the equilibrium price. In fact, if that were so, then it wouldn't work. In a free market, some products are sold above the equilibrium price, and some are sold below. It's free, because people can offer the product at any p…
> I can't figure out whether you're feigning ignorance or whether you really didn't pay attention in Econ 101.
Actually, neither, I'm saying that the claim made by the post I was responding to doesn't work unless you assume that the general assumptions of Econ 101 and the conclusions drawn from it in terms of overall outcomes are assumed to apply not to overall outcomes but to every individual decision in the marketplace.
Which I agree is ridiculous, which was my point.
Re: CEO cuts his pay by almost $1M to give his employees big raises
#50This 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 sav…
can we really make this assumption? if everyone is paid the same where is the incentive to do more? how is morale affected in the reverse when you know you make as much as someone else who decides to slack?
while there are some benefits to increasing salary very large increases may negatively affect those already at a higher pay scale and some may dissociate effort with reward.
now if you dangle the carrot out there as a truly obtainable reward for meeting fair targets, then it truly becomes incentive for both retention and reward