CEO Will Live on $70,000 Worker Wage, Thinks His Life Will Be Luxe Enough
Now there may be people who think that i am crazy for this, but I applaude and admire this guy. He sees the issue, and he is focused on his company first. He knows that a company is more than the CEO, it is a sum of all your workers. He's not pulling a20th Century Motors thing, he isn't letting them decide "who needs it", he is sharing it across the board. Very logical, and will make his employees incredibly loyal, as they know he understands what is going on throughout the company.
Good plan. I hope it works out for him.
The people at the clerical level will do well -- as long as he doesn't sell the company or otherwise end the game which will leave them in an awkward place looking for work with an expectation that they should be paid 70K. I know a couple of people who were really messed up in the dot com era by getting salaries that they couldn't get again when people weren't willing to pay high dollar for anyone who could turn on a computer.
And, of course, it will feel really good for people to be working hard and watching others screw around -- knowing everyone gets paid the same.
It's hilarious how these liberal clowns jump on this like he's the Messiah.
My other thought is that Gravity is basically a small-fry PayPal, he may be in talks to sell it... if that's the case, he doesn't give a hoot, he will cash out and the new owner will stop paying the receptionist and janitor $70k / year pretty quickly anyway.
Interesting no one commented that he made a million a year and had the workers using cheap / small laptops and working on what looked like temporary folding tables & chairs all day...
It is good that the employees will benefit from his generosity instead of sucking the company dry.
I did the exact same thing. My CPA assures me it's legal. I also use the business to pay for anything I can that is honestly business-related.
Funny how the IRS loves to audit you if they think you didn't pay enough... but I've never seen them come to someone that pays too much and offer to find ways to give them a rebate...
He take $100,000/year as salary. The rest is in Berkshire Hathaway shares.
It's the government's system; these guys just know how to game it. And I'm OK with that.
I wonder about "humanities studies". Is there a pecking order for humans? Will the CEO by surrendering pay differential also lose the respect of many in the work force? Maybe. In most human organizations there is order, chain of command, or white and blue collars. If he surrenders the apparent differences, what will the micro social outcome be? What happens when a General takes off his stars?
I hope the media reports the outcome as certainly as they have the headline.
1) Did the story mention his bonus and equity structure? It may have and I missed it.
2) This is somewhat like those stories you hear from time to time where the CEO takes a $1 annual salary. This is a relatively short term arrangement for him. It goes back to previous levels if the company does better in the next year or two and if the company doesn't do better ... I'm sure something else will change. He is clearly not saying that he has decided that he just needs, and that he is "just" worth $70k per year from this point forward. He basically doesn't need any salary in the short term because ...
3) He has few expenses. It sounds like his house is paid for. He doesn't need a new car in the short term. He has made a more healthy salary over the last n years so I'm sure he has plenty saved and his retirement is probably already secure at age 30. Good for him. Well done.
4) This point is of lesser significance, but he also mentions that the crowd he "hangs" with is wealthy. So again, he can afford to take a year or two with lower salary and still be part of this crowd. Various expenses will be handled by osmosis, in the short term.
5) He started this company when he was 19. It is his baby and I am not surprised that he will pour everything into it to make it successful. And again, good for him - that's what you want out of a CEO. But this fact weakens the premise of the story. Comparing this CEO and his salary structure to all CEOs in general may be a bit like comparing apples and oranges.
I do find the story fascinating, especially for the comments over there on the Yahoo story.
I suspect this scenario plays out way more often than people realize.
If I had a large multinational company like an HP or a Dell or an Apple and I needed a new CEO, I would structure the incentive plan such that the CEO took a stock salary the first five years and got deferred options (five-year vestment period) only after the first three. That means that they would have had to run the business well for _eight_ years before they could cash in on the larger payout. Why? Because it takes at least two years for the old CEO's policies to finally leech from the system. Product lifecycle in tech industry is 18-months to two years, meaning that it would only be after four years that you would start to see new products hitting shelves that were completely initiated under the new CEO. Give them a year in the market to judge profitability and there's your five years. Additionally, I want them focused on the long-term - not the cut-and-slash that makes them popular on Wall Street. I want a company that lasts for decades - not a quick blip.
Also, I wouldn't give them the power to hire or fire anyone for the first year. It's a management fad when the top echelons change out to bring along all your hangers-on and establish them as VP's, etc. right off the bat and all it does is create chaos and entice your best people to jump ship. Brain drain is incredibly detrimental to all companies.
Yes, it was a crony decision - she was groomed for the position by Lou Platt - former HP CEO, though how that happened when she wasn't even an employee of HP is beyond me.
What is just staggering to me is that in doing so they totally ignored the fact that up until this policy was put into place, HP had been enjoying frequent stock splits and profound profitability for both employees and investors. I worked there as a summer intern and as a full employee (even though I was just there for the summer) I was eligible for quarterly profit-sharing. I knew of a lot of people in our city who bought cars, swimming pools, boats, etc. off those quarterly profit-sharing checks. It is no coincidence that under Lou Platt eligibility for those got restricted to managers and under Carly they were eliminated all together. It is also no coincidence that during that time HP stopped being a manufacturer and became a designer and marketer. There is something about putting out a quality product with your own two hands that can not be duplicated.
When did HP come out with a dvr for oscilloscope? I made one in college in 1990 for my digital design class project that was used in physics class.
After HP
After resigning from HP, Fiorina was named to several board memberships. She was named to the boards of directors at Revolution Health Group[59] and computer security company Cybertrust.[60] The following year, she became a member of the board of directors for chip maker Taiwan Semiconductor Manufacturing Company.[61] She joined the board of trustees of the Massachusetts Institute of Technology and the Foundation Board of the World Economic Forum. She is an Honorary Fellow of the London Business School.[62][63][64][65] In July 2012, Governor Bob McDonnell of Virginia appointed her to the James Madison University Board of Visitors.[66]
In April 2012, Fiorina became chair of Good360, a nonprofit organization in Alexandria, Virginia that helps companies donate excess merchandise to charities.[67] (From Wikipedia)
And yet she thinks she is better than Hillary..... Look at how many "Boards" she has sold her brilliance to. She is working without working, the new America...
http://money.cnn.com/2015/03/30/technolo...
Ain't that the truth!!!!!!!!!!!!!
+ Many for this post..............thanks, kh
I, however, find nothing useful in moaning on about how much someone else gets paid. It's pointless. What should matter is what YOU are doing to demonstrate your value.
I agree that interlocking directorates artificially inflate pay, but I can see a possible scenario where someone is worth 1 million. If a company's earnings are in the billions and the best manager can improve them by 0.1% over the next best candidate, it makes sense to pay the better manager hundreds of thousands more than the next candidate. In practice, the positions are probably influenced by board politics, as you say, but I wouldn't say it's impossible for someone to bring millions of dollars of value to a large org.
Perhaps he is contemplating taking his business public? Perhaps this will get it recognized enough to make the public offering quite successful.
I started my career job in 91. Till about 94 every employee had profit sharing and some stock options. Then the grunt jobs lost these, then it creaped up and by 2000 only management had stock and bonus plans. Everyone can thank Jack Welch (CEO and author of Winning) for that BTW.
I see this as someone taking a shift back the other way. Its a good direction and I hope it is hugely successful for him and then mimicked by others after he proves it helps with success.
What should also be noted was that during those years, the employees were rewarded for their successes with quarterly profit-sharing checks that were frequently as large as a paycheck in and of themselves. As a result, there was no lack of people who would volunteer to get a last-minute shipment out the door and no lack of those who would volunteer to work weekends or overtime to help debug a problem because they were vested in the outcome!
That changed after a couple of years of Lou Platt. He did away with the Division carnivals (massive affairs hosting thousands of families with food, games, and entertainment all paid for by HP) and limited profit sharing to managers. Between Platt and Fiorina, they also did away with the employee purchase program which enabled HP employees to get HP gear at cost, and then further limited profit sharing to just executive management. Then they started charging for office supplies, outsourced all their maintenance and cafeteria workers, and then finally their manufacturing divisions altogether. And as each employee benefit dwindled, so did the quality of the products.
The first massive layoff under Fiorina (which claimed my father as a casualty) was all about benefits - healthcare to be specific. You see HP was liable for the healthcare costs of any employee who had retired with >20 years of service until they died. They didn't want to be saddled with this cost, so they laid off their best and most knowledgeable employees in one fell swoop. Future layoffs similarly claimed their victims from the ranks of the best, leaving an entirely new crew of employees who knew nothing of the HP Way - nothing of the values of Hewlett and Packard.
To me, it is an instructional tale of how to build and then destroy one of the most creative legacies of industry in modern times.
That being said, we certainly can't (and IMHO shouldn't) stop companies from making bad decisions in CEO hirings. That it has trickle-down effects that get passed on to hundreds or even thousands happens. No, it's not fair, but it's life.
I'm sure that many of us believe that helping the poor and disadvantaged is the christian thing to do. At the same time we need to recognize that there in lies the slippery slope of welfare. Many of us believe that helping educate the disadvantaged, providing training or tools that they can use to improve their lot in life is the more realistic approach. Granted, this approach requires each person to become responsible for improving his/her situation. Fortunately we live in a country where we still have the freedom (for now) where we can be the masters of our own destiny. We can strive to become more, to learn more and to do more. Welfare handouts do nothing to solve the fundamental problem and research has shown that these handouts perpetuate the dependency on government to solve their problems. Our future is in our own hands and we are free to do with it as we please.
20th Century was inherited by some moronic, spoiled children, who were of the same education as a lot of CEOs (read: We are rich, so we are smart, so we are better). They then took their "smarts" and applied it to the company. allowing everyone to vote on who "needed" the pay. Pay for performance is not a new idea and is in use in some companies (mine for example), but even then, there are distinct issues with it. It relies on those above determining what that "pay" is worth. So even if things would grind to a halt without you, "they" do not see it that way, and it is translated into a higher pay raise, above your peers. That does not stop the "management" from cleaning up because they, of course, have these huge responsibilities, like making sure all the minions get to work.CEOs set strategic direction, policy and then, then, need to know enough of the business to know why nuts go on bolts and replacing them with washers because it is cheaper, is still a bad idea. Many, many do not. The Home Depot deal was the stellar example and cost them 80 million flushed down the toilet into the guys pockets just to get rid of him. They couldn't fire him, send him to Antarctica or anything. That is Board irresponsibility as well. Our future is only in our hands as far as we can reach and that is not too far in corporate america. That may have been part of AR's message. reach as far as you can, but sometimes if you have a better idea/product and the faith, bail out and do it yourself.
The mainscream press will use this example for why the minimum wage should be raised to $25/hour. "See, this guy pays his floor sweepers $35/hour. And he's glad to do it." If the company goes bankrupt or is sold for a bundle 2 months after the story airs doesn't matter to them. They never go back to close the loop on their stories. It's all about creating false perception long enough to get voters to go along with another bad idea.
They will all be loyal to the paycheck not the employer.
While he is taking a bit of a different twist, he is still "spreading the wealth" evenly regardless of the efforts put in by each contributor, thus making everyone the same. Watch how this implodes.
I know in my ciurcles in IT, about 90% of the REAL work is only done by about 10% of the people. when that 10% "shrugs" because they are not receiving the only recognition that really matters...a wage difference between them and the lazy, his company will start falling apart at the seams.
I know I am going to watch and monitor this so I can throw it in the face of every liberal who loves socialism. Watch the mainstream media ignore the story when his company faces bankruptcy and everyone is unemployed.
Having said that it is HIS company he can do with it what he wants.
1. It will "work" in the manner so wonderfully described by many who have commented on the article. Specifically, human nature will "triumph" in the end.
2. The same motivations to publicly present this story, will NOT publicly present the results - unless they serve to impugn the CEO.
The "bottom-line" is that it is his company and he may do with it as he pleases. Those who desire, however obtusely, something for nothing, will, as they most always do, get nothing from something.
studied motivation pretty thoroughly for an IE masters
and there must be personal recognition associated
with $$, else it becomes a "utility" like clean H2O in
the u.s. and is taken for granted.
we can just hope that his management team makes
everyone know that their contributions are valued
individually. -- j
"When asked what life will be like for him at a lower pay, he said, "I haven’t even thought about that at all, too much. My life started pretty simple, in a lot of ways. I don’t have a lot of financial obligations or debts."" So maybe he doesn't need it, and as others have pointed out, he may want to sell it and make out that way. If it is his own, and someone wants to swallow him up, then he stands to come out better off. I don't know, hard to tell what his motive is, maybe he really does want to make it better for his employees... weirder things have happened.
and I have apparently always been.--Never mind,
a man should be paid what he's worth, and accord-
ing to what he produces. If he produces more than
that and is worth more, it seems kind of foolish
to me. But I didn't hear the story, so if the com-
pany is in trouble, and he is doing it to save it,
maybe there is some reason for it.
First off, he's CEO, not sole owner as far as I know. So he can't take ownership distributions, unless I'm misunderstanding things.
Second off, you can pay people a billion dollars a year, but if they don't get their raise they "deserve" every year, they're going to be pissed. Every single one of the $25,000/year workers will spend their way up to $70,000/year lifestyle within a few short months, and be in WORSE financial shape than they were in before. Then, they'll "need" to make more money, and complain when they don't get it. They won't be able to find work anywhere else at this rate (because they've been coddled for so long in their dead-end job that paid over double market rate), and so they won't be able to leave the company. BUT, they'll be pissed because they're not getting more money and raises like they "deserve", they'll create a horrific environment for those who actually manage to live on that "meager" $70,000/year, drag those guys down into the whining and complaining toilet, and you'll have a company full of pissed off people. AND, chances are, they'll probably complain to a union and get the company to be forced to retroactively pay them raises.
Of course there will be exceptions, but this will be the main group of what you see.
Now, CEO's and companies can afford to "float" a little bit when their yearly revenue gets cut by 40% in a bad year. These employees CERTAINLY will not. Try cutting someone's $70,000/year salary across the board when the guy used to make $65k/year before your little social(ist) experiment. See what he does. AND, try cutting the floor mopper's $70,000/year salary down to $50,000 for the year... see what happens then.
This man is crippling the people who are in dead-end jobs, by saying to the new 19 year old kid "Oh hey, I know you've only developed 5% of your capability, and you're probably high-level manager material, but why don't you just stay there answering the phones and not develop yourself".
AND, you're going to have the actual skilled people at that company who make say 65k now, looking around saying "why the hell am I busting my butt as a manager when I could just answer phones for 70k... screw it"
I look forward to watching this one tank, right out of the book.
I did misread it the first time, his managers can make more than 70K, that's just what he's going to take and what he's going to establish at the low end.
And, I agree with you, he's going to really mess with their lives.
At least his income should shoo fly gold diggers
I wish the dude the best of luck.
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