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Since I happened to know a boss who had a shiny new car while not being able to give out huge raises, let me tell you the other side of the story: That company
by groby_b 9y ago
Since I happened to know a boss who had a shiny new car while not being able to give out huge raises, let me tell you the other side of the story:
That company had been broken in to, with extremely valuable equipment stolen. The insurance company promptly paid for it, replacements were bought - all's well in the world, right?
Not quite. It turns out, due to tax law quirks, the new equipment's cost as a tax deduction needs to be spread out over years (6 IIRC), but the payout from the insurance company is taxable as a lump sum. So, while the balance sheet is net even after the break-in, the tax man wants a huge chunk of money that he's then willing to return, in small increments, over the next years.
But the company is cash poor. And a loan is not feasible, because it's already stretching the limits. A call to the accountant is in order. And, as it turns out, second quirk of tax law, if you buy a car on a loan, you can claim the entire expense in the same tax year, but you can spread the paying back over the next several years.
And so the car was bought, at significant long term cost to the owner, but it fixed the tax/cash shortfall problem for the current year.
Step two after learning to keep your mouth shut: Learning that the situation is always more complex than you can see from the outside.
- wolfgke 9y ago> Step two after learning to keep your mouth shut: Learning that the situation is always more complex than you can see from the outside. Rather step two that the CEO should have done: Explain these quirks of the taxation laws, so that any rational person has to come to the same logical conclusion based on the evidence.
- monsieurbanana 9y agoA step that the CEO certainly would have done, if it happened, which it most probably didn't. I'm not saying it couldn't happen, or that it has never happened, just that you'll need some serious arguments to convainc me it's more probable than the CEO being simply a crook.
- groby_b 9y agoYeah, totally. "Our cash flow is bad enough that I need to move debt into the future to - barely - make your salaries" is just the thing you as a boss should say to your people.
- wolfgke 9y agoYou write it satirically, but I believe that being honest to your employees if such a type of problem occurs, is indeed an important virtue of a good leader.
- groby_b 9y agoThis depends on the industry you are in, and the kind of people you are leading. Many industries are low-margin and have constant cash flow issues. Telling your employees achieves nothing, in that case - their next job won't be less precarious, they just lose a little bit of piece of mind. You make the active choice that some (who want to see you as a crook anyways, see other replies) think slightly worse of you, while the vast majority can go home and sleep in relative peace. It's a very different situation if cash flow crunch is completely unexpected, or highly likely to be fatal, with stable businesses around. As I said above, the situation is always more complex. You make decisions accordingly :)