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Seattle CEO Cuts $1 Million Salary To $70K, Raises Employee Salaries
First time accepted submitter fluffernutter writes Dan Price started his company, Gravity Payments, out of university when he was 19. Now he is cutting his $1 million salary to $70,000 and promising to raise all his employees' salaries. Dan is quoted as saying he made the move because "I think this is just what everyone deserves."Good business practice? Silly boosterism? Enlightened self-interest?
Srsly. I ain't into dudes or buttsex or penises in my mouth, but that's one fine looking man with a great big, firm, throbbing... moral compass.
Just seems like a decent thing to do.
I've seen this headline about 5 times in the last 24 hours, on a variety of media. It's certainly good for advertising, if nothing else.
The Quirkz Handbook of Self-Improvement for People Who Are Already Pretty Okay
If you dig through more articles it states that he'll be paid $70k a year until his business starts making above a certain amount again.
So far I've seen this guy on Facebook, the Today show, Reddit and now Slashdot. It's making its rounds and is a great PR move.
That's what's wrong with 'Murica today, too much socialism. We need to nip this kind of thinking in the bud! When will the working class realize that they only benefit when their betters are allowed to run things as they see fit, unrestricted by regulations and burdensome tax laws?
I am sure that the employees will expect that at some point that everyone will get raises too. And where is the incentive to work harder?
A lot of CEOs (a good example was Steve Jobs) will take token small salaries because most of their income is from their ownership in the company.
If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?
He surely owns a large chunk of the company: Why take a huge salary when you can motivate your employees to work harder and make the company worth more? That is a faster way to get rich than just paying yourself a salary.
He gets rich faster, and the employees are happier. It's win-win. Just don't pretend it's about "justice" and not simple self-interest.
Meh.
Sometimes the "writing on the wall" is blood spatter...
Good business practice? Silly boosterism? Enlightened self-interest?
Why not all of the above? He's generating buzz for his company, one which I've never heard of before. His employees will probably be happier, and he's probably getting stock options or something else we don't know about here, so that fits both the good business practice AND enlightened self-interest. It could turn out to be "silly boosterism" if it doesn't end up having any of those effects, but you won't know that immediately...
Taking guns away from the 99% gives the 1% 100% of the power.
While a campaign is underway in B.C. to raise the minimum wage to 15 dollars, a Seattle company is going to pay its employees at least $70,000 a year.
Basically everyone (even the janitors) will make 70k. I'm sure the CEO will have stock and options in the company to make far more than 70k but his "official" earnings is the same.
Giving up 930K to go viral and generate a ton of good will toward you and your company seems like an incredibly good deal.
...what about the bonuses?
CEO salaries are getting ludicrous, and while his $1M is not that outrageous compared to others, it still could be translated into about 10 FTEs. Setting a minimum wage for his staff, and making sure they can all survive on what they make at their job, will translate in staff dedication that will be hard to put a price on.
I think he's also thrown the gauntlet down to other CEOs, saying: "Dare you to join me!"
He probably has more than enough for this and several other lives, why would he want more?
He makes the bulk of his money from stock. The cut in salary is way cheaper than buying advertising.
Steve Jobs famously took a $1 salary, yet he was one of the highest compensated CEOs in America, and that was saying something.
Of course, Jobs was worth it. But let's talk about what a great job he was doing (or in some cases, wasn't doing), not his $1 salary.
This isn't hard to do -- it simply means that the company will eliminate all jobs making less than $70k and supplement with contracted individuals and companies. It's easy to say that you would pay janitors $70k a year if you don't actually employ any janitors (and wouldn't employ any janitors because you don't want to pay $70k for them).
If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?
Yes, when it means the minimum wage of his employees jumps from $34,000 to $70,000.
Once your net worth is sufficient such that you don't have to earn a salary anymore, you want to switch the majority of your earnings to income from investments.
Investment income is taxed at the capital gains rate, whereas regular income is taxed at the much higher income tax rate.
This is the simplest explanation you can read, but it's one reason why the rich keep getting richer. We've set up a welfare state for them.
The tax rate on his salary was 40% (marginal). The tax rate on his capital gains is 15%. He could even come out ahead.
Let's suppose Wal-mart started a floor at something reasonable, say 20$ an hour. This would attract a much better class of employee and in turn customers. They wouldn't spend nearly as much on shrinkage and retention as they do now... I think it would transform the entire company.
love is just extroverted narcissism
If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?
I think these kinds of statements are missing the point.
The real story here is: hey, you can still make an ass-ton of money without leaving your employees as slaves!! Everyone can win and grow together, rather than a subset at the expense of the majority. (and happy employees produce more, willing to work more, etc., so the company and therefore CEO benefit even more -- it's a positive cycle).
If it's not a big deal to lose some salary because it will be made up for in investment income/dividends, then why don't more CEOs do this? I hope this guy starts a movement; even if his intentions were not entirely altruistic, it is still a good thing.
What a lot of people don't realize is that top brass gets compensation that's often not in their salary e.g. stock options. Salaries are taxed at the ordinary income rate. Bonuses and options are not. More than likely this was a weasel move to garner public support while secretly loving the fact that his tax burden has been significantly lowered.
Good business practice? Silly boosterism? Enlightened self-interest?
how about a lack of understanding of exactly how millionaires and the wealthy operate in society. The fact that this CEO took more than a tenfold pay decrease is irrelevant. hes paid for homes and invested heavily in stocks to such a degree that he, like other rich people, lives off dividends and interest from investment. These forms of income, as our plutocrats have decreed, are taxed much less than wage income, what the average dirt-riddled peasant earns. While his salary might be paltry it also misrepresents what C level pay really represents as a token of corporate esteem and establishment. in other words, C level pay is a mark of status for a company.
the sad fact is by reducing his pay to the level of commoners, hes done an excellent job of reducing the amount of taxes he pays. the good news is Hes also given free publicity to the company and likely reduced turnover. Ultimately Dans private college attendance infers hes quite a bit more well-to-do than one might think. A trust fund does wonders to the average business owners outlook on the world.
Good people go to bed earlier.
Upping the salaries of the ones whose efforts pay *his* wage is a good thing.
So one neutral act,one good one. You do the maths.
The summary has it wrong. It's not that the CEO lowered his pay to $70k, the company has raised the minimum pay of everybody in the company to at lowest $70k. It's even in TFA. Yay for editors.
(Honestly editors have a thankless job where they can be right 999 times but people only notice that 1 wrong... but still, this is one of the times they got it wrong.)
Steve Jobs was paid just $1. Don't forget that things like stock options generally pay a heck of a lot more than the salary for CEOs. Lots of startups like this one pay all employees more than $70k. They've done a fine job of getting publicity with this move though.
Weird.
Your mantra is you get paid for your efforts, do more work, get more pay, and everyone is available to become what they want in a capitalist society.
But here you are saying that the wealth should not be passed on.
How the hell do you manage to keep both weird cult ideals in one head?
The company was making $2.2 million in profits, and 75-80% of that is also going into this wage increase. So he is significantly lowering his total compensation by a drastic amount (probably around 20% of his previous compensation).
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
I've read it many times. Still don't see it.
A 20% pay cut is severe, but only over the minimum wage difference. Someone pulling 5 mil is still unable to spend it quicker than it comes in. It just isn't piling on as quickly as it was at 6mil.
It doesn't mean so much as bumping up the salary of all the workers, but it might make it easier to argue with the shareholders.
What you should do is stop focusing on whether the dude is indeed negatively affected by this or not, and switch to whether the people who work for him are positively affected or not. They ARE positively affected and that's all that matters.
I don't care if it's a PR stunt or calculated move, I care whether the employees of that company are happier. If they are, all's peachy.
...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
I am so tired of the CEO as Pharoah mentality that has evolved. Let's just stop doing that.
Yes. He returned $930,000 to the bottom line. How many of us do that? And he took a 20% pay hit. How many of us are willing to do that?
Gamingmuseum.com: Give your 3D accelerator a rest.
Give that man a raise!
interactive hologram, or it didn't happen.
Part of the ability to do this depends on the nature of the business. The number of employees at Gravity Payments who earned below $70k was about 70 people. It'd be much more challenging to do this if your business had 3500 factory workers, each making $10/hr
This is exactly what's wrong with America. The majority is convinced convinced that our economy is broken because people aren't working hard enough. I'm convinced of the exact opposite. The reason the economy isn't working right is because people are working too hard in exchange for too little. Furthermore, we could be more productive, and more prosperous, by working more cooperatively and less competitively.
Who said anything about Janitors making the same as a skilled employee? I seriously doubt this company had many employees making much less than $50k. Pretty much all the employees were skilled to a degree, and probably most of them probably already made six figures. Most companies don't directly employ janitors these days. Everywhere I've worked, they are outsourced by building management.
This is not just a good thing for Gravity's employees, it is also an enormously thought-provoking action at a time when such actions are rare.
Even imagining that high tech is a true meritocracy, which is a fairly dubious imagining, American companies are still floating in the sea of American business. And America has been heading towards historic levels of income inequality, higher than the levels that preceded the great depression. We tend not to learn our lessons until we shoot ourselves in the foot or higher. This CEO is demonstrating the obvious -- once you are making a ton of money, you can begin to share it with the people who have helped, are helping, and will continue to help you make even more, and this can have a positive impact not just on the people you are sharing with, but on YOURSELF as well, and on your society.
A positive impact on yourself, because you will be appreciated and honored for doing a very decent thing.
And, if your society were to pick up on your lesson, all sorts of good things could happen: it would be less likely that your children will get an infectious disease, because other children would be healthier; you would be less likely to have to pay for more prisons, because people are less likely to turn to crime when they are able to participate in a flourishing economy; you would not need to invest quite so much in alarm systems for your mansions. You might find the public schools improving because there would be fewer people going to private schools. You might even need to invest less in a military because with less income inequality, the politicians' focus might change from protecting our billionaire class' stolen overseas assets to protecting our country while aiding the poor in our own and other countries.
Total compensation is another. You can bet he's making more than $70K/year when you look at more than just is tax return....
My tax return has a taxable income that's under 6 figures, but if you look at everything, I make nearly $200K/year with benefits, retirement, increase in investment value, real estate etc...
They have taken token salaries so that they do not have to pay income tax, NOT because they are heroes. "Compensated in stock" is another word for "Tax evasion"
It isn't cute, it is CEOs taking advantage of YOU directly, and looking like heroes when they do it.
I am sure the CEO has a boatload of stocks in the company....
I'd be mad as hell if my boss gave me that kind of raise! In fact I'd be so outraged that I'd invite him over for dinner and let him bang my wife.
Captcha: Acrobats
Thanks for the tip.
The cynical side of me wonders if he still maintains stock options, etc. but that is besides the point. The point is that he did it when he didn't have to. More importantly he is raising the salaries of others at the same time that he is lowering his own. It might be symbolic to a certain extent but I'm betting that the people that got raises are not seeing it that way.
Well played Mr. Price, well played.
Yes, when it means the minimum wage of his employees jumps from $34,000 to $70,000.
How many employees were making less than $70K? How much are they increasing? What do they do? How much of that was funded by his salary decrease? (Someone else posted that 75-80% of 2.2 million in profits was used, suggesting that about 40% of the overall salary increases were funded by his pay cut.)
This seems to be a Seattle company (it has a Seattle area code: 206). Has anyone bothered to notice that $70K is low for a developer salary in Seattle? So what we have here is a bunch of non-developers getting large salary bumps and developers getting smaller bumps which may be offset by loss of stock value (assuming developers get stock awards or options). This also is likely to make it more difficult to hire cheaper non-developers (like QA or call center personnel).
Jeff Bezos of Amazon had already been making the same salary as a line developer ($80K in 2008--probably more like $100K now). Bezos actually makes less than a typical developer if you count stock awards (although he is much richer and may have a much higher investment income in a given year). Amazon does not attempt to pay non-developers in North Dakota the same wages as developers in Seattle. That may explain why Amazon can employ tens of thousands of non-developers while Gravity Payments is considerably smaller.
Note: I'm not saying that CEOs should make giant salaries. I rather like the Bezos solution actually. Nor am I saying that other workers shouldn't be paid more. I am saying that paying workers more isn't unabashedly good. Unless you are extremely rich like Gwyneth Paltrow, you tend to purchase less as prices increase. This means that salary increases often lead to drops in employment. If they don't, then something else is occurring.
It seems like this is getting more attention than places who are hiring $2.5 million of new employees. Yet going from unemployed to employed at $34K is generally more helpful to that individual than going from $34K to $70K would be.
In the '90s it was a big deal when Apple got Steve Jobs back for a $1 a year salary. Of course he was compensated with stock options.
With some Tech CEO's having a salary and net worth more than the GDP of the UK one wonders what a "living salary" is today.
Maybe $70k ? ;-)
In general I applaud this sort of restraint, but I hope it is the full story. As anyone who has contracted knows, you are a knob to accept a salary if you can avoid it. Having the money come out in dividends, capital gains or trust/company income basically takes you from a punitive tax regime into one where you can manage tax in remarkably creative ways.
For example if you want to run a race car, you can quite happily claim back the costs of racing as an advertising expense so long as you put a logo on your car. In some countries you can even run the racing company at a loss which can be offset against other income streams. Want an overseas holiday? There are rules around a business meeting at the start and end that can make the majority of a trip deductible. Even easier if it is to just attend a professional conference that just happens to be in a tropical holiday destination (hint hint). Personally I found this sort of slight of hand quite disgusting, but many of these issues are very hard to define clearly in legislation.
Anyway, point is this is a good move, but may not tell the full story. Lets hope it does.
I think this has been tried before
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
Some find it inconceivable that one would do anything because it's the decent thing to do, and they can do it.
Another article mentions the average salary was $43k, and the lowest was $34k, which makes it sound like most of the employees are paid less than $50k.
The company will be out of business in short order. And that's a GOOD thing, the idea that a janitor should make the same wage as a skilled employee is utter horse shit.
Unless you are the janitor of course.
Labor should be priced by the market, not some nut job's idea of fairness, or this "living wage" nonsense. Want to live better? Work hard, get a better education and then get a better job...
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
for maximizing employee productivity. Most of those workers won't be able to go somewhere else without taking a big pay cut. That means he can set as high of a standard for productivity has he wants, because the workers will do just about anything to keep their higher-than-market wages. I wonder if anyone will be able to make over 70k at his firm?
He isn't negatively affected at all - sure, his bank account might not be as full (and there's the increased equity from a more motivated business to consider).
His chosen lifestyle is paid for, in full, by the $70k salary. He's winning.
Now his staff are too. And he feels good about that. That's something that putting more money in his own pocket wouldn't have bought him.
Maybe the problem is CEOs who look at that pile of money in their account, and say "What the hell can I do with all this?!?" and their answer is what benefits one man.
So here you are, a clerk or some other lower on the totem pole individual who is now making $70k. You buy a house, maybe a used car, or the reverse, either way, you increase you expenses because you can. Even frugal people would do it, it's human nature.
So now it's a few years later. The company goes under, you get laid off and you go around looking for a job that pays $70k for doing what you were doing.
None to be had.
Compensation has been commensurate to your skills for hundreds of years. It may suck for the unskilled, but that's what works. For the employer and the employee. You increase your skills, you increase your pay. Do more, get paid more. When everyone makes the same or nearly the same for vastly different levels of skill and effort, then you are headed for trouble in the long term. Just look up the Jamestown Colony and how it worked out for them.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
Steve Jobs got into non-poaching agreements with other Silicon Valley firms. So if you worked for Apple, you couldn't quit and get a pay bump elsewhere because nobody would hire you. Salaries were depressed.
A class action lawsuit was filed by the employees and Apple (and other Silicon Valley firms) settled paying nice money.
So Steve Jobs is NOT a good example!
While I can commend this guy for decreasing his own salary (I doubt he's worth $1 million a year), increasing everyone else's by that kind of margin may be more detrimental than at first glance. Salary disparity between CEOs and the lowest paid in a company is too large, but that doesn't mean employees were underpaid, I think it means CEOs are overpaid. Reality is probably a bit of both.
Imagine the lowest paid employees there (receptionist, janitor, etc), the ones that doubled their salary with this increase (meaning they were making $35K a year before), if they ever need to move or change positions, they will suddenly NOT be making that much. They've priced themselves out of the job market without having skills truly valued at this new pay rate.
In essence, they've almost become stuck working there since no one else will pay them this much. And let's face it, most of them that can now own a house, start a family, or whatever else they were saving for will now need to have that continued high rate of pay to keep what they've built for themselves (or will build over the next few years).
The alternative is a drastic pay cut, causing them to significantly drop their standard of living, possibly sell their home for something smaller, and sell off their luxuries...possibly even struggle to support the needs of their children (if they had too many to support with the new hypothetical future ower salary).
This can backfire spectacularly, but maybe it won't, and for these people's sake, I hope it won't. I just think downstream impact was not taken into consideration.
I've read it many times. Still don't see it.
A 20% pay cut is severe, but only over the minimum wage difference. Someone pulling 5 mil is still unable to spend it quicker than it comes in. It just isn't piling on as quickly as it was at 6mil.
I can EASILY see someone spending 6M a year on stuff. The collector car market is particularly expensive as this one (admittedly extreme) example indicates.
CEO pay cut may backfire; new payroll nearly 300% greater than profit
http://www.examiner.com/article/ceo-pay-cut-may-backfire-new-payroll-nearly-300-greater-than-profits
Nonetheless, it appears that the reporting media seems to have missed that while Gravity Payments annually pulls in $2.2 million, even if the 121 individuals had their pay but to $70K, the new payroll amount is astronomically greater than the bottom line. Simple math illustrates that 121 employees multiplied by $70,000 base salary equals a whopping $8,470,000. The calculated baseline payroll doesn't take into account those already paid greater than the base pay amount.
Also not taken into account is the cost of leasing office space, maintenance and cleaning costs, power and utilities, furniture upgrades, office supplies, etc. Just the updated minimum payroll is 285 percent greater than what the company pulls in.
In the meantime, social media has been active in questioning the business savvy of Price. More than a few have been openly asking what motivation does a 10-100 percent pay raise instill a worker to do a better job or instill a sense of ownership in the company they work for? Others have opined that Price should have kept salaries as is, then instituted profit sharing across the board. It's widely understood in the business world that day-to-day costs would go down, as well as the employees fully understanding the better quality work they do, the more money in their pockets.
...when pot was legalized
So what you're saying is that Biggie Smalls was giving out good financial advise? "Mo Money, Mo Problems"
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I worked and worked and worked during high school, got perfect grades, completed college with two 2-year degrees in IT, applied to many different jobs, worked crappy jobs to have something to put on my resume, and at 24 I was hired as head IT manager at a 100 person company. I "deserve" the wage I get paid (well below $70,000 actually).
Some entitled, pro-union asshole doing semi-skilled that may or may not have graduated high school and has the job they do because of a criminal history does not deserve $70,000 per year. So all those assembly line/Taco Bell/Walmart people saying they want a "living wage" and $15/hr, maybe you shouldn't have fucked your life up. You made your bed, now sleep in it. If you want to "fix" your situation because you think you got your shit together now but no employer agrees, start your own business and get rich if you're right.
the employee that left a week before this announcement to another job that paid $50K. :) We'll never hear if that actually happened if that person is smart.
Steve Jobs understood this. The rich structure their compensation as much as possible to come in the form of capital gains and dividends. Why pay payroll taxes and regular income tax rates on your compensation if you're rich. Long term capital gains are taxed at a much lower rate and have no payroll taxes taken out. With backdated stock options you can control your compensation precisely.
This is one of those ideas that looks really good on paper, but is likely to blow up in his face. There are three big problems I see.
1) When you pay people more than the going rate, they start to think they deserve it and parts of their job are beneath them and they shouldn't have to do it. Some of his employees that were good at their jobs will become bad at them when he gives them extra money. Fortunately, he will easily be able to replace them, but it's still a waste of what was a good employee.
2) The people that are not getting big raises will be jealous. This will cause a lot of bad blood and internal issues.
and the biggest problem
3) Most of the people will realize that they will never get another job that pays that well and will never do anything to risk their job. That means never disagreeing with their boss. Never speaking up about any issues. They will just keep their heads down and their mouths shut. They will take no chances, so they will not ever be able to innovate anything and the company will grow stagnant and rot from within.
Is usually in interest free loans which is equivalent to a secret salary.
(Recalling from when my former CEO had a $1 salary which he bragged about, but said nothing about any loans.)
If you say that it's not necessarily better work or happier workers or more motivated workers if you pay them more, then this applies doubly so for the executive class.
Or is that something you're not wanting to discuss?
The Janitor is probably a contractor with a cleaning company and would not be affected by the policy.
I want to know where this CEO is going to get the money to bring everyone up to $70K per year. His $1Million salary is only going to fund 13 people.
If it wasn't a media stunt, then why is he all over the news? It would have just been in one or two papers. At last count he is was in over 8 different media outlets.
Hey! As long as they pursue their socialist fantasy within the confines of their own company and leave the rest of us out of it, more power to them!
Why would you be happy about the prospect of them going out of business? I wish them long life and prosperity.
A "skilled worker" would have to be quite the a$$hole if he agrees to work for a certain salary and then gets upset because he isn't making more than the janitor to whom he feels superior. Let him quit and good riddance.
The article I read mentioned "clerks" and "customer support reps". Maybe they sub-contract cleaning, security and other menial work?
This means that salary increases often lead to drops in employment
Can you cite any evidence for this? I'm not talking about theory, but about real-world cause and effect. Because I don't think it's anywhere near that simple.
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
His way of being a capitalist:
You don't have the incentive to do your work correctly?
He will shout you there with sincere anger.
Just natural authority, no manipulation or big money needed in his scheme of things.
Capitalism allows business owners and leaders to CHOOSE to make decisions like this. Socialism forces them to do it.
Every civilized country engages in socialism. The only difference is in the degree to which they do it. A society which does not will rapidly fall apart. If you have a job it is because a lot of other people worked very hard to make it possible - even if you work for yourself. We require people pay taxes and minimum wages and other things because it benefits us all. While you can take it too far, we're certainly in no danger of that here in the US.
Liberals don't really understand the importance of this distinction.
Liberals understand that the real world isn't a place where we can afford to pretend we don't depend on each other. Share a little and everyone benefits. It is possible to both share too little and share too much. Personally I think the sharing too little is the worse of the two options.
The founder is cutting his salary. But salary is only one form of compensation. Many CEOs work for $1 per year. But they are still making a lot of money.
They have a strict limit set to their ``pay slope'':
http://www.theglobeandmail.com...
They're a great company and I'm always pleased to buy stuff from them.
I wish more companies would pay attention to the studies which note that greater than 22--1 creates a lousy corporate culture.
Sphinx of black quartz, judge my vow.
Being poor is damn hard work and with the way tuition has been rising, precludes getting a better education.
The owner decided to do this of his own free will, regardless of what his motive was. That's the point of freedom. You're allowed to choose.
And most will choose not to of their own free will. That's the problem. If we made taxes optional, how many people do you think would pay? If we eliminated work safety rules do you think best practices would be followed? Real freedom isn't the absence of rules and obligations because society cannot function without them. Real freedom is being able to have a meaningful say in what those rules and obligations are and should be. Real freedom isn't depending on the beneficence of a single CEO deciding one day to be a nice guy.
Under socialism, your choices are far more limited. As with most forms of collectivism, either things are mandatory or they're prohibited.
Tell you what. Take a trip to Europe sometime. The EU is by many measures the largest economy in the world. The standard of living in most of the EU is quite high compared to much of the rest of the world. Most governments in the EU have what is generally acknowledged to be a somewhat socialist ideology - certainly in comparison to the USA. And yet they have good health care, good GDP per-capita, world class businesses and manufacturing and art and sport, and are among the most successful societies on the globe politically, economically, militarily and socially. All while "socializing" certain aspects of their society and what do you know, it works if you don't take it to the extreme of communism.
Here's the point of all that. We ALL depend on each other. You can argue about how much sharing is a good thing but you cannot argue that all sharing can be optional. It simply will not work. Some folks simply are more willing to acknowledge this fact than others. You can argue about how much sharing is a net benefit to society but the argument Socialism = Bad is just stupid. EVERY society has some amount of socialism to it and it cannot be otherwise.
A capitalist decided, on his own, without government interference, to increase pay.
Which is the exception that proves the rule. How many CEOs do you see arguing FOR an increase in minimum wage? They could voluntarily do it but very few actually do. CEO pay has increased FAR more than the average pay of the workers lower down so any argument that CEOs will decide to en-mass increase wages is pretty much delusional.
That's WAY over the chart for a salary. Even if it's your own company.
Yes, I'm sure rogoshen1 has lots more experience at effectively and successfully running companies that generate multi-millions in profits than any MBA or other business school graduate ever possibly could (assuming bobbied even is one, which we don't know). Please enlighten us all with your vast non-MBA, non-business-school expertise. The entire discipline is obviously useless and we'd be much better off just playing it by ear and getting lucky. No sense actually studying for the job you plan to do, that would just be counterproductive. Hey, why don't we have doctors and pharmacists and particle physicists just figure out the new way of doing stuff as they go too. All this stupid formal education nonsense is overrated...
Anyway, I'm all for him voluntarily cutting his own pay and either using it to grow the business or returning more of it to the workforce, but going this far beyond that seems very risky to me. It's EXTREMELY difficult to take away something once you've given it, so if there are salary cuts and/or layoffs later on, the end result will almost certainly be worse then having not excessively jacked up pay far beyond market rates to start with.
It's his own experiment and I'll be interested to see how things go in a few years. Initially there will be an increase in business by customers who "want to support a 'good' company," until they realize they could get similar services so much cheaper that it's starting to cut into their own bottom line and put them at a disadvantage to their competition; then a significant percentage of them may jump ship.
This could absolutely destroy his company eventually, or it could end up actually helping the bottom line in the long run due to workers going the extra mile (plus good publicity), or it could be generally neutral but with happier employees. If it were me, I'd stop at reducing my excessive salary and passing on the savings to workers, but not cut into profits further by a fixed amount. Or better yet, just start a bonus plan that returns a reasonable percentage of Net profit directly to workers. That way their extra compensation beyond market rates is tied to the company doing well instead of some arbitrary number that might or might not be the approximate limit of how much happiness money can buy and that can't usually be reduced without a revolt, even if the company has a really bad year and can't afford it. Naw, that would make too much sense, that's the sort of crap one might learn in business school, so it's obviously wrong.
tax avoidance, not tax evasion. tax avoidance is legal and moral, tax evasion is illegal.
The real story here is: hey, you can still make an ass-ton of money without leaving your employees as slaves if you wholly own a small company!!
Say a CEO of a company company with 25000 employees cits his salary from $4m to $100k. That would mean each employee would get an extra $156 per year. While $156 is nice it will not make much difference. The other thing is that, as the owner, he is still bringing in over $1M/year from profits.
No, that is not tax evasion, I believe that you may be confused about the terminology (or are doing it on purpose for the sake of hyperbole, which is even more unhelpful). This is a case of setting up earnings to be tax advantaged (or tax avoidance), either deliberately or as an advantageous consequence of something that is potentially very good. There is a very real difference (see the article heading where it says "not to be confused with tax avoidance"). One is criminal, the other is sound money management. To put it another way, are you suggesting that you do not take any tax deductions?
-Turkey
I'm not saying this is a bad move, but it may not be a purely good move for the employees.
-- Slashdot, making the Left look conservative since 1997.
In the meantime another CEO is paying himself a record salary for cutting his stock's value in half...
Seven puppies were harmed during the making of this post.
Moves like this aren't philanthropic. It's a common tactic for a vested CEO to cut their salary to just $1. But because they are vested (EG: stock options, partial ownership, etc) they make out just fine.
As a company owner, I could cut my salary to just $1 and it probably wouldn't affect my true annual gross income at all, since unpaid salary just becomes profit.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
finally someone gets it - no company needs a ceo paid 1+million -
any executive can comforatbly live for 250K per year and no company should pay anyone it employees
more than that and still be fiscally responsible
spreading the wealth like this will only create happier more productive workers and
make the company stronger
any company that wants to be globablly competitive should be starting to think about an
across the board 250k cap and roll all the extras back into supporting salaries for all employees and into
the company r&d etc
kudos to him - finally someone gets it
There are a lot of CEOs who make $1 per year to pay less in income tax, and rake in hundreds of millions in stock comp. Also, $70K is barely adequate in Seattle.
Now only if companies like AT&T, Verizon, and BOA would do this. Also lets not forget the little guys that pay minimum wage for working a shitty job like "Autozone, Advance Auto Parts, Walmart, etc."
We just need salary caps in the USA, and forced return of company pure profit straight to the workers. But that'll never happen in this shit hole.
They have taken token salaries so that they do not have to pay income tax, NOT because they are heroes. "Compensated in stock" is another word for "Tax evasion"
It isn't cute, it is CEOs taking advantage of YOU directly, and looking like heroes when they do it.
Fuck you. Seriously, just FUCK YOU!
http://www.nytimes.com/2015/04/14/business/owner-of-gravity-payments-a-credit-card-processor-is-setting-a-new-minimum-wage-70000-a-year.html?_r=0
The guy is giving up over $900k in salary, and reducing company profits by $1.6M. That leaves the company with $600k in profits. The company is owned by him and his brother ( http://en.wikipedia.org/wiki/Gravity_Payments ) so presumably they spplit the profit equally. So he's giving up $900k + $1.6M / 2 = $1.7M per year so that he can get an awesome tax rate on his new $370k income.
Seriously, just shut the fuck up. They guy could offer to wipe your ass for you and you'd just accuse him of trying to profit for free off you with his new manure company.
They paid themselves token amounts, but the company afforded them a 0% loan that they never have to pay back.
This CEO might know Nick Hanauer, and agree with what he's been saying: https://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming?language=en
He mentions in the video they're also raising the minimum wage to $15 an hour. I don't think it's immediate from when I checked into it, but within 3 years that will be the minimum wage in Seattle. And like he says in the TED talk, it makes all the sense in the world to do things like this when you're at the top.
Their "profit" right now is PROJECTED, not actual. Once people from the "janitor to the CEO" learn that working harder will NOT get you ahead, people will start slacking off, because there is no incentive to do a good job. This will be another FAILED trial of socialism, but, you can bet there will be little if no press coverage, when this fails.
His salary cutn goes into profits as it is no longer an expense, that offsets the wage increase expense. He also makes out like a bandit on tax avoidance and good will generated.
This time next year (after the initial partial accounting cycle) he and the company will be making more than ever.
The problem is actually your reading comprehension. This was a response to "What he just did was remove all money worries from his staff." That's absolutely false for exactly the reason mysidia states, and he/she didn't even say it that bluntly and instead used phrases like "not necessarilly" and "not exclusively caused by" which makes your response even more puzzling.
Where exactly you get that crap you're making up as a strawman I have no idea, but it certainly was NOT in the post you're actually replaying to.
In short, you're an idiot.
I was refering to 0 pay CEOs like Apple and Google. The guy in the article is doing something completely different, and far less slimy. I think the 70k ceo is awesome, and 0 pay billionaires are scumbags.
Depends how you define media stunt.
The first youtube pranksters who decided to give some money away to the homeless by "pranking" them (in a positive way) were all over the news, then 1000 wannabes popped up and all of a sudden there was no fuss about it.
Was it a media stunt? Probably. But it was all over the news because it was a first.
What this guy did maybe ain't the first, but it's as rare as one would imagine. Rare things like this get all over the news regardless whether that was the intention in the first place. Someone will tell someone else and the media will jump at the opportunity to show something people crave to hear. I can't imagine how he would do what he did anonymously.
The problem with many people is that they have grown to be so cynical that no good-will gesture would be perceived as selfless. "Surely there must be something fishy there". Well, maybe there is, maybe there isn't. I personally don't think there is, not in this case, but you're free to believe what you want, I ain't gonna try changing your opinion.
...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
Count of business owners making such a decision under capitalism: 1
Not the first or only time this has happened.
The best known example happened about a hundred years ago. One of the greatest capitalists of all time doubled the wage of roughly 14,000 employees. Not because he was generous or forced to do so by a government or union, but because it was a good business decision.
What would Bill do?
This will be an interesting sociological experiment. Maybe he should have consulted a financial accountant before announcing. The math certainly doesn't add up. When he gets to his utopia, assuming that his fixed costs, number of employees and revenue remain the same, his employment costs will increase by at least $2.8 M per year. His business will then be losing $600K or more every year instead of making a $2.2M profit. That can't sustain for very long. Maybe he's counting on getting a subsidy from his fellow taxpayers via the federal government.
Current total employment cost (less benefits) 120*$48K*1.0765 (SS & Medicare)*1.0207 (unemployment ins.)=$6.21M. Future total employment cost (less benefits) 120*$70K*1.0765 (SS & Medicare)*1.0207 (unemployment ins.)=$9.06M
Of course, he owns stock and this will definitely serve him well, but it's a brave thing to do. This is what is known as true LEADERSHIP, a quality that becomes more scarce by the minute i the tech industry.
The irs is going to fucking rape him.
The ceo must be highly compensated. They want their pound of flesh. There's a reason why ceo are highly paid and it isn't greed. At least not theirs.
Keep doubling down on the derp, dude. AC was right, your stand says more about you than it does about him and what it is saying is that you are a morally defunct classist who wants his slaves back in the field where they belong. Keep spinning that turd in the blender though, it'll be a great shit shake, I promise.
That's why you aren't understanding the problem- you're already comfortable. You aren't struggling to make ends meet at $2.18/hr +tips so you just don't see why those lazy addicts are up in arms. You are disconnected from reality, Tink, and this is why you "don't get it" but as is typical of comfortable folks, you have no problem sitting there in your La-Z-Boy passing judgment on the lazy boys. Fucking hypocrite....
Toyota and "budget" do NOT go in the same sentence!
Larry Page earns $1, despite his company making plenty!
Don't give money to that homeless guy he's just going to spend it on drugs.
Wait, that what I was going to spend it on.
Who am I to judge?
Two things:
1) If your company is only making a profit of 2.2 million, and your compensation is approximately half of that, it is way too much. For starters, more than that should be getting reinvented into the company for growth, not crippling your own company so you can have a fancy car and house.
2) He started the company. No idea if it is public or not, but either way, the guys wealth is likely very much tied more to the valuation of the company, not what he takes home in salary. That is why you see CEO's with salaries of 1$. It isn't that they are altruists, it is that their salary is rather meaningless when compared to compensation due to stock, or by ownership. By cutting his salary to what might be considered a "normal" wage, he does two things, one is a larger amount can be investment into growth, and growth makes him more money in the long run anyway, and two as a "stunt" his company (which I have never heard of) gets a ton of free positive advertising which would have probably cost more than that anyway, AND if the company was private and thinking about going public you have a situation where you are getting your brand out and at the same time reassuring potential investors that here is a company that is serious about taking it to the next level and growing and generating profits, rather than just another being led by a CEO trying to rob it blind before moving on (i.e. personally vested interest)...
So the moral right thing, and all that aside, it actually just makes a lot of business sense. He also probably saves a killing on his personal taxes this way...
I had the idea of creating a kind of certification / badge for companies that a reasonable pay gap.
The certification organism would audit the companies salaries, bonuses and stock options, and certify that the gap is less than say 1:10 ou 1:20.
Then the company could advertise it. Customers would make the decision of buying from certified companies.
You can still end up with employee dissatisfaction. The guy making 34k now makes 70k. The guy making 70k still makes the same. You will end up with employees who hate the job, but will just stay for the money. Hopefully for him the benefits will outweigh the possible negatives.
Salary and income are two different things. What's his bonus? Is he a regular viewer of Portlandia?
Everybody else on /. seems to agree (how often has THAT happened!) that it's a truly noble action, and I also applaud this move. I have a concern though. After tax, 7- grand can plummet down to the mid 30s, in actual *usable* incomne. Perhaps another 20g is safe with some kind of shelter, but you can't easily spend that money, so it's not usable. That means that his monthly income would be around 3 something grand. In Seattle, a bachelor ap't can easily run 2Gs or more, and a house (rent or mortgage) $2.000 to $2.500. Doesn't leave a lot for $350 P.M. car payments, "smart meter" calculated energy costs ($300 p.m.) etc etc. That means he's going to have to slowly increase his pay/reverse his pay cut to get by. And there's the rub. How the devil would his employees react to a CEO who couldn't calculate his living expenses effectively? And then had to bump up his salary? Now, maybe he really is lucky to have very low living expenses, but what if an emergency comes along.. Those bonuses would be the only thing he could tap into. All of this means nothing, really..Just thinking out loud.. I still think it was a good move in a world full of greedy investors, shareholders, and CEOs who believe the new mantra of record returns every quarter. It used to be a good investment was one that was stable and trustworthy , and nobody expected record profits each and every quarter.,.. "sigh"
Nick has given a number of talks about income inequality and has been challenging other rich business owners to make drastic changes. One of his TED Talks was controversial enough that it was not aired.
https://www.youtube.com/watch?...
https://www.ted.com/talks/nick...
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"Every artist is a cannibal, every poet is a thief."
http://news.yahoo.com/warren-b...
Casteism