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CEO cuts his pay by almost $1M to give his employees big raises
- icpmacdo 11y agoGiven 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.
- sweedy 11y agowell, for a storry, covered in times, buzzfeed, cnn, herald, huffingtonpost, vox.. countles other, and even on the christianpost, i guess its not that surprising.
- higherpurpose 11y agoIf it's genuine, then it's working as intended if it's going to get more CEOs to follow his example.
- tallgirltaadaa 11y agothis is my second time seeing it, and i still dont remember the company name... soooo maybe not
- cookiecaper 11y agoThat's because no one is mentioning the company name -- it's just nameless CEO gives nameless employees more money. The company is Gravity Payments.
- cookiecaper 11y agoBumping a salary is an ongoing expense and commitment, and it has several serious long-term consequences. You can buy 900k in publicity outright and be done or 900k in publicity by bumping salaries and have an ongoing commitment with very substantial HR and tax implications. They'd have to extract a lot more publicity than they could've gotten by paying a PR firm a million dollars to make it worthwhile. I doubt that's happened.
- crimsonalucard 11y agoWhat about options? Does the CEO get options that raise his wage to a height that is still unfair?
- CapitalistCartr 11y ago"Price, who started Gravity Payments out of a dorm room when he was 19, wholly owns and operates the company . . . " Besides, what is fair?
- crimsonalucard 11y agoIt'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."
- Rainymood 11y agoNo it's not fair, he doesn't deserve that company he put his whole life in! Nobody deserves such a thing! \s
- crimsonalucard 11y agoMakes perfect sense. Because his company isn't built on the shoulders of multitudes of employees. He alone built the entire company with his bare hands and his "LIFE". Therefore all employees deserve nothing and he deserves 100%. \s
- chatmasta 11y agoTen 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.
- nearmiss 11y agoGreat! 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!
- totalrobe 11y agoAnd then those overpaid employees will be laid off...
- deong 11y agoIf you're buying the company for its "goodwill", why would you then very publicly torch that very same goodwill by laying off all the employees?
- chatmasta 11y agoBecause revenue needs to be greater than cost for a business to survive.
- deong 11y agoOf course, but my point is that you know this going in. The assumption was that you'd buy the company not because it was so insanely profitable, but because you reaped a PR benefit. So you buy the company for the sole reason that you look good for paying everyone well, and then take away all the money to increase profits. This makes no sense -- you look far worse PR-wise for revoking the raises than any benefit you originally got from buying them in the first place, and PR was your reason for the deal. This is like buying Santa's workshop so kids will like you and then executing all the elves. You should have just bought a profitable company in the first place.
- bko 11y agoThis 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? That being said, 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.
- pc86 11y agoAre otherwise qualified employees fired the moment a more qualified candidate expresses interest in their job? I don't see that being an issue. Perhaps what determines "qualified" will increase along with pay? I think it will certainly increase the overall quality of employees over time, and this may push out the least capable folks over time. Has there been any comment by the higher-paid-but-by-no-means-rich contingent of the company? I imagine there are quite a few developers, engineers, and other technical folks in the $90-125k+ range there whom this does not affect directly, but may impact their ability to get raises? The article states company profits are going from $2MM to $500k so the odds of this impacting someone's 3% raise if they make $125k is slim but still a possibility depending on team size and composition (I would think).
- bko 11y agoThis kind of broad policy will almost certainly have unintended consequences that will be interesting to watch play out.
- cookiecaper 11y agoI agree. Realistically I think this will be a short-lived experiment; everyone who got the raise will keep it, but I wouldn't be surprised if they go back to paying new hires a market-competitive salary within 12 months.
- borgia 11y ago
- IanDrake 11y agoPay? 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".
- vidarh 11y agoThen 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.
- smokeyj 11y agoThe 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).
- mattlutze 11y agoIf the gambit is that, in the recent future, they expect new business from the publicity to increase profits and cover part of the loss, I think the hit is not so large. And ultimately if it doesn't pan out, he can sell the company to a larger processor and cash his 100% stake out.
- smokeyj 11y ago> And ultimately if it doesn't pan out, he can sell the company to a larger processor and cash his 100% stake out. Do you honestly think that isn't plan A? He's going to flip the company, pocket the cash, and all those employees who experienced a temporary rise in salary will be unemployed. When Mr.CEO doles out equity instead of cash I'll give into the warm fuzzy feelings.
- AC__ 11y agoImagine 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.
- blfr 11y agoPreviously https://news.ycombinator.com/item?id=9371854 https://news.ycombinator.com/item?id=9371854
- brianfitz 11y agoI responded to this in a previous thread, but I think I can simplify it down to the perception versus reality of the change the CEO has enacted. What many people believe: The CEO has set a minimum compensation bar to help those with market wages below $70k. What has actually happened: The CEO has determined that going forward, he'd rather hire people with higher market wages and more experience versus paying lower wage workers. Over the next few years, the company will slowly shift to one with a more experienced workforce. This could pay off, and would not be that unusual. What is different is he drew a specific line in the sand and grandfathered in his hires prior to the change.
- colechristensen 11y agoYou know what's terrible? How very unwilling nearly every company is to hire and train inexperienced workers while simultaneously complaining about not being able to find talent.
- golergka 11y agoHire and train vs hire talented is a very different strategy. Training requires more resources up front and it comes with a higher risk; it's suitable in some situations, but it certainly isn't for everyone.
- PopsiclePete 11y agoEspecially true in software, isn't it? I kind of get it, though. We tend to jump ship a lot. So a company isn't willing to invest time and money to train me and then I jump ship a year later to greener pastures. I get that, but at the same time, if I wasn't treated like a disposable cog, maybe I wouldn't jump ship even if I was actively being poached? Just an idea.
- tixocloud 11y agoI agree. We went through hundreds of interviewees who didn't pass the coding tests and it really stifled the growth of the company. At the same time, the wage rate being offered was below average because that's what we could afford at the time. I saw some potential in some folks but other team leads felt otherwise. There's a difference between being able to code and not having enough experience in a particular domain to solve the problem in 20 minutes.
- AndrewKemendo 11y agoThis 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 what is actually happening. I wonder if there is a way technologically to bring radical transparency to the workplace so that this kind of stuff is discoverable without the company needing to put out press on it.
- mattlutze 11y agoIf 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.
- JoeAltmaier 11y agoI don't understand - he's giving up salary (not profit), so why does profit change at all?
- mattlutze 11y agoOnly part of the total cash needed to make the raises will come from his salary; the other 1.5MM, apparently, will come from profits.
- AndrewKemendo 11y agoWhat then is the purpose of making such a press event out of it? It's clearly them promoting their brand by jumping onto the fairness bandwagon. That doesn't mean the CEO doesn't actually believe in it - he probably does - but it means that they wanted to do it in a way that makes a spectacle out of it. As others have pointed out though, all it's doing is moving up the skillset requirements of people they hire in the future. So while it helps the few people who are already on-board by getting a raise (which is great by itself), it likely wont help an entry level person who now won't be hired in at 70k.
- sickpig 11y agoThis 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=9371854 https://news.ycombinator.com/item?id=9375978 https://news.ycombinator.com/item?id=9375978 It seems to be a real hot-button to say the least.
- srtjstjsj 11y agothis one is a different article, but same story.
- mayukh 11y agoThe NextDraft effect ?
- sickpig 11y agoDave Pell is really influential among people who read hn imho, so yes NextDraft network effect could have played a role here. That said I think jurnos really like this kind of narrative and subject, since it's really appealing to theirs audience. It's a sort feedback loop that time will help to "break".
- rebootthesystem 11y agoDespite 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.
- midnightmonster 11y agoThe CEO also owns the company. "Don't I have the right to do what I want with my own money? Or are you envious because I am generous?"
- joshyeager 11y agoThe CEO wholly owns the company. So his only fiduciary responsibility is to himself.
- emodendroket 11y agoI guess you could argue this if it was a publicly-traded company (although sometimes you get what you pay for). For a privately-owned company it's a totally irrelevant argument.
- danenania 11y agoBut there's no such thing as an absolute market value for chairs--it's a function of quality (among other things). There are plenty of CEOs who choose to buy expensive chairs for their employees without causing any controversy. Employee market rates are a function of quality too. If paying twice as much gets you employees who create three times more value, that shouldn't be a controversial decision either.
- PopsiclePete 11y agoI'm honestly glad this is one CEO who's not figuratively sucking the Wall Street c. I know* he's expected to do that for the good of Capitalism and all that junk, but, honestly, is pleasing a bunch of, basically, very-overpaid gamblers what we should strive for, as a society, as a culture, as a country? What about happiness? Less stress? Not hating the 8-10 hours a day you spend of your life working? Why is funneling money up the chain to those that already have more than any human could possibly know what to do with, such a great thing ??? Yes yes. I know. I have a 401k too. We're all in on this, but I'm glad that somewhere, someone, decided to take one for the team, so to speak, and made a few dozen people happy. Just because he could. And if that pissed off a bunch of "investors" because the shares dropped from $82.52 to $81.88, I'm ok with that.
- mgkimsal 11y agoA question that springs to mind when reading this (and stories like it) is "Could the company have gotten to the point of $2m in profit by starting everyone off at min $50k+?"
- dataker 11y agoWhat most people don't realize is that, working in a startup, he probably holds a large amount of equities. When/If there is an exit, he will cash out a LOT more than his employees. That's his real 'bonus'. In Wall Street/corporations, executives are less prone to have exits so they give themselves tremendous bonuses. A totally different case.
- jamiesonbecker 11y agoHenry Ford did something similar a century ago: https://en.wikipedia.org/wiki/Henry_Ford#The_five-dollar_workday https://en.wikipedia.org/wiki/Henry_Ford#The_five-dollar_wor...
- mhassaan 11y agoThis blunt move can get him loyalty in return ,which itself is a requirement for taking his business one step ahead .