
“Today I cut my pay to $0. I'm committed to laying off 0 of our employees.” - piliberto
https://twitter.com/DanPriceSeattle/status/1244014634883039232
======
brenden2
What I've been hearing on the internet is that companies are racing to lay off
as many people as they need to now, before applying for their free bailout
money from the government. It also sounds like businesses are trying to lay
off more than they actually need to lay off, in order to get the maximum
benefit.

The terms of the bailout loans are such that they can lay off people before
they apply, get the money, and so long as they don't lay off any additional
people after they get the money, the loan converts into a grant (i.e., a free
bailout from the Federal government).

My personal opinion is that giving free money to companies is a terrible idea,
and they should just give helicopter money to individuals. Companies are going
to engineer this to their maximum benefit, and the amount of money going to
companies is much much greater than the amount going to individuals.

Interesting times we live in. It's important to ignore what people say, and
instead focus on what they actually do.

~~~
ttul
Business owner here. First, let me dispel the myth that business owners are
wealthy. All of my friends from school have more liquid assets than I do. I am
utterly broke unless you count for the paper wealth of my company shares.

When COVID hit, within a week we had customers dropping out of our sales
funnel. Half of our expected revenue growth disappeared as customers decided
to reduce risk and stick with existing solutions. This is what happens when
the market goes “risk off”.

My company, like most, is leveraged. If I don’t earn positive cash flow,
covenants on my debt will trigger a default, instantly ruining the firm. One
default cascades to all the facilities, because that’s how debt works.

So, if I need to get to cash flow neutral, I am going to lay people off. I
have no other option. It’s either that, or ruin.

This is why the government is supporting businesses by effectively becoming a
lender of last resort. By tapping government loans, I can maintain my
employees while we wait out what will probably be a short period of downturn.
The money I have been offered is three year. Three years from now, we have
either figured this thing out or we are living in caves. I’ll pay back the
loan and my employees will keep their jobs. That’s how this works.

If I could provide feedback to policy makers: government should get something
in return for the largesse. A small stake in each company, for instance, that
we have the option of buying back at cost later. Because if society is
supporting my business, society should have a stake in its recovery. I have
not seen that happening anywhere.

~~~
pdeuchler
If a 50% drop in expected revenue _growth_ causes you to default on your debt
you are either a startup that had trouble raising money, in which case now you
know that you do not have a viable business plan, or you are running a
completely unsustainable business that only existed because of easy access to
cheap debt the past couple of years.

~~~
ttul
Common misconception. It’s not uncommon for companies to use leverage to fuel
growth. High yield venture debt is often tied to growth metrics. It’s not a
mistake to operate a company using venture debt. In a highly competitive
market, if you don’t lever up, your competitors will eat your market.

~~~
pdeuchler
> It’s not uncommon for companies to use leverage to fuel growth. High yield
> venture debt is often tied to growth metrics.

This is, of course, exactly my point. "High yield venture debt" only exists
due to absurdly low interest rates and an abundance of capital being driven
out of public markets and into private ones. Now that the free lunch is over
do not be surprised that your lenders come calling now that your "high yield"
(read: risky) loan is no longer profitable under current market conditions.

> In a highly competitive market, if you don’t lever up, your competitors will
> eat your market.

I.E. When capital is cheap and abundant it is possible to burn cash on an
unsustainable business plan for marketshare, but when the entire market itself
rapidly shrinks your business plan is horribly unviable.

~~~
mam2
Honestly most companies, not startups only, run on the idea that if you don't
have debt, you're doing something wrong. It's not entirely false when the
economy is neutral at least.

------
Reedx
Stewart Butterfield (Slack CEO) was asked if he'd commit to not doing layoffs
and I appreciated his response[1]. Effectively pointing out that it's easy to
just say yes in their position, and that it's presumptuous of Salesforce to be
asking for no-layoff pledges. It's pretty meaningless and comes off as shallow
or self-serving PR for types of businesses that are doing better than ever
right now or can easily weather the event.

The CEO of Texas Roadhouse, a chain of restaurants, gave up his salary and
bonuses to redirect to employees[2]. A particularly noteworthy example, I
think.

1\. [https://youtu.be/3aVh0QYPtVI?t=427](https://youtu.be/3aVh0QYPtVI?t=427)

2\. [https://abc13.com/6052453/](https://abc13.com/6052453/)

~~~
zaksoup
The author of the original tweet is the CEO of Gravity Payments, a Square
competitor that mostly serves smaller retail and restaurant businesses. In
further tweets he talks about how they're losing tons of revenue right now. I
agree that it's shallow for Slack and Salesforce to pledge not to have layoffs
but in this case I think it's a pretty meaningful commitment.

------
liamcardenas
Almost everyone I know who has run a business (myself included) has made
similar sacrifices. This is not that rare. This guy seems to serially try to
generate PR by making himself out to be a selfless CEO. In doing so, he is
implying that most other CEOs/business owners are bad people.

~~~
Judson
I wouldn’t be so cynical.

It’s important there are vocal leaders showing the sacrifices they are making
— otherwise it’s easy for others to pretend it isn’t possible to make the same
sacrifice.

~~~
liamcardenas
I think it’s counter-productive. He is making this seem like a huge sacrifice
when, in fact, it’s par for the course. I wish if he wanted to talk about it,
he would make it less about himself and more about “what it takes to run a
business”. In many cases, people pay themselves nothing, take on debt (without
having ever made millions of dollars per year), and don’t guilt-trip/lord it
over their employees.

(Ok I’ve said my piece, I won’t continue to be a hater :P)

~~~
munificent
_> in fact, it’s par for the course._

I would be _very_ surprised if any significant fraction of CEOs and business
owners had cut their personal compensation to this degree. Sure there are a
few here and than, but probably, what, less than 5%?

This guy is clearly trying to garner some promotion out of his sacrifice, but
he did still make the sacrifice and I think it benefits our society to laud
people who do this.

~~~
liamcardenas
You are definitely right for CEOs of large companies. But for small (aka most)
businesses, including startups, you might be surprised. It’s also important to
note that some business owners don’t have the luxury of being able to cut
their own salaries (because they are already living at subsistence levels) and
sometimes don’t even take any salary to begin with. By paying himself nothing,
he shows he already has resources accumulated (which is not a bad thing!).
This is a luxury some business owners have and others do not.

------
todd3834
Not to be pessimistic but I assume when a CEO cuts their salary there are
other forms of compensation like stock. Maybe someone here with more
experience can weigh in?

Cutting $70k only helps one person keep their job. How many employees do they
have?

Anyways, I still applaud his desire to keep 100% of his employees. It is
noble. Board and shareholders might disagree but it is nice to see someone
looking out for the people ahead of the business in this time.

~~~
DoctorOW
Did a little more poking around but he also gave up his stocks and savings
according to this tweet:
[https://twitter.com/DanPriceSeattle/status/12334746629670051...](https://twitter.com/DanPriceSeattle/status/1233474662967005185)

~~~
nostromo
The article states that he did that in 2015. This tweet is retrospective.

------
sytelus
I don't know much about this guy but when I hear a founder CEO cutting his pay
to $0, I have to roll my eyes. Vast majority of CEO comp is in equity so
cutting base pay to $0 has no material meaning. In addition, successful
founder CEOs have typically already cashed out to the tune of millions of
dollars while still retaining significant stock. With that much cash in the
bank + ownership stack, the annual salaries or bonuses are icing on the cake.
No CEO without a significant ownership stack is going to settle with $0 or
even $70k.

------
benatkin
There are a bunch of tech CEOs who pay themselves one dollar.
[https://thehustle.co/1-ceo-salary/](https://thehustle.co/1-ceo-salary/)

~~~
rsync
I am aware of this, of course, and always find it interesting ...

According to my own understanding of US tax code(s), one must not reduce their
w-2 income to zero - or even relatively small numbers that do not befit their
position or responsibilities.

The issue here is that a funding for welfare programs, such as social
security, are taken from wage earnings. It is, in fact, _preferable_ for me,
as a business owner, to reduce wages to zero and take compensation in the form
of dividends or distributions.

But I cannot legally do that. I have been advised by multiple tax
professionals that not only can I not do that, but I cannot have a
conspicuously low salary. At the very least I need to hit the max social
security threshold to avoid scrutiny.

So I always wonder how these $1 and $0 earners make this work on their
personal tax returns ...

~~~
SpicyLemonZest
The $1 earners put a lot more than $1 on their W2s. Zuckerberg for example has
$1 salary, $0 stock, and $22 million "other compensation" including security
and jet costs.

~~~
rsync
That's not how a W2 works. All of those other forms of compensation are, of
course, _in their 1040_ but are probably on a K1 or other amendment.

Social security contributions (to pick the most important one) can only come
from wage income so the question remains: how are they paying into social
security and, if they are not, why is that allowed when it is generally
assumed that it isn't ?

------
outside1234
Is he the majority shareholder? If so, is he really making a sacrifice here or
just deferring when or how he is getting returns.

~~~
throwawaynerdy
This is exactly what I was thinking.

This is an expensive (?) HR and PR Ad.

In 10 years the popularity of the company should be higher than today, the
company will be sold and gutted.

~~~
optimaton
Someone who is going to such lengths to save their employees should at least
be given the benefit of doubt.

He did something similar 7 years ago, so I don’t think he has some ulterior
motive with all this or a grand plan. IDK, Seems like a great guy to me.

------
amelius
Sounds like how it should be. Business owners are taking the risks, but also
profit more in good times.

~~~
Ididntdothis
These days I wold argue that especially in small businesses and startups the
first employees are the real risk takers. The owners/founders will usually
find a way to get some money when a company is failing while the employees get
nothing.

~~~
CoryAlexMartin
How are owners of small businesses able to make money while their company
fails? I would like to know because I plan on starting a business in the
coming year.

~~~
tucaz
I’d like to know too. If it’s so easy to make money while failing I think I
might start a business just to fail and make money.

Rinse and repeat and I’ll be rich very fast.

~~~
erikerikson
I didn't see the part where anyone wrote that it was "easy".

------
hizxy
Thats great and all but I think people are using the pandemic as a marketing
tool—“Look at how good we are to our employees”.

------
6gvONxR4sf7o
I wonder why we aren't hearing about companies selling more stock for funding.
Sure it's at a huge discount, but better dilution than destruction, right? Is
it just because the bailout loans offer them a better path? Or because they'd
rather lay folks off than dilute?

~~~
wool_gather
Are there enough buyers for stock to make that useful right now? (Non-
rhetorical question; I have no idea either way.)

~~~
6gvONxR4sf7o
There's no less cash in the market than a month ago, so at the right price
there should be buyers? But since alongside cash, there's also credit and
assets, I actually have no idea how much less cash-like "value" there is, even
if the fed or somebody helped turn it all into cash. I suppose the government
could always be the buyer instead of giving loans.

Good question ¯\\_(ツ)_/¯

------
arkanciscan
Dude's got a savior complex

------
twblalock
For some companies the choice is between laying off some workers now, or all
workers a few months from now.

Large companies with cash in the bank may not have this problem, but small
businesses often only have a few months of runway.

------
optimaton
Fantastic! People never go out of business, but businesses do, take care of
people not some fictitious entity.

------
goatherders
Are we really patting people on the back for cutting their own pay to allow
employees to be paid more? That's how economics work: if you want to pay X
then you have to find that money somewhere.

~~~
FillardMillmore
I did not downvote you, but paying people more is not a zero-sum game. The pay
rate of an employee is not necessarily contingent on the salary of a CEO. More
money can be attained through the creation of value in an economy - this value
will add wealth - this added wealth could allow for both the employee and the
CEO to be paid more.

~~~
goatherders
Agree completely. It's a nice gesture that the CEO cut his pay but - in
agreement with you - there are lots of ways to increase employee pay.

------
Hitton
I read about this guy here one month ago. Some commenters were claiming that
he is doing it for PR.

[https://news.ycombinator.com/item?id=22441129](https://news.ycombinator.com/item?id=22441129)

[https://news.ycombinator.com/item?id=22441354](https://news.ycombinator.com/item?id=22441354)

~~~
keanzu
Every twitter post by every corporation/majority owner/CEO/founder ever is
done for PR.

