
Ask HN: Majority owner cofounder increased salary by 3X what can I do? - throwaway2019XX
I&#x27;m the minority technical co-founder and my co-founder who holds majority control of the equity in the company just informed me that he increased his salary by 3X three months ago. We had agreed to take the same salary since we&#x27;re both working on it full time and each bring unique skills to the table needed for the business.<p>After reading the bylaws I&#x27;m pretty sure there&#x27;s nothing I can do legally. Has anyone been in a similar situation? First of all, the lack of notification has damaged our relationship from my side because I feel that the information was deliberately withheld from me as long as possible. Secondly, I cannot see any angle where the salary is appropriate for the stage we are at. Any related experience is appreciated.
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tucaz
That sounds really weird especially when you mentioned in a comment you have
investors.

One of the key things investors monitor and control is how much people make at
the company.

Especially the owners or founders. Investors want their money to go into the
company and not into anyone’s pockets.

With outside investment I would assume you will have very specific workflows
to increase the owners salaries and that would have to be approved.

Look into that. Also, if you talk to the board and/or investors I’m pretty
sure they can help you get this on track without any need for harsh
measurements.

People make mistakes and until you figure out the reasoning you should not
assume malice.

Once you know malice is involved it doesn’t matter how much harm any
“fighting” will cause to the company because at the end of the day, there is
no goodwill anymore so things will get worse from there.

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andrewstuart
Talk to him about it, try to do it without emotion, just facts.

Be curious, not accusatory.

Tell him you're having trouble understanding it, would he mind explaining the
thinking.

Don't try to resolve it at that time, says thanks and let him know you'll
think about it and perhaps continue the discussion later.

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throwaway2019XX
Thanks for the advice. I kind of did that in the prior meeting when I found
out about the change, but got answers that didn't satisfy me. The company is
doing well, so I think parting ways is a non-option for both of us and I'm
trying to determine the best way forward without sitting in a permanently
dysfunctional environment.

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TheSpiceIsLife
> _We had agreed to take the same salary ..._

Would it satisfy the agreement if you also took 3X?

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throwaway2019XX
Well, we actually agreed on a specific number and we also have to consider
what is reasonable and makes sense for the company at this stage.

I don't think I would agree to that because it would not look good for our
investors to be taking huge salaries right now.

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saluki
Maybe you could both accept 2x, or try for 3x see what the board says, maybe
they will push for you both to go down to 2x or 1x. This way should feel more
fair to you and get your relationship back on track.

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deogeo
This could be something akin to breach of fiduciary duty or self-dealing [1].
And if you have any record of the agreement that you're to have the same
salary, that could potentially carry some legal weight. Note that I have no
experience in law - you should get advice from a professional. I'm sure an
hour's chat to see if there's a chance at legal restitution, before going all
in, would not be too expensive.

But you probably only want to use the law as a bargaining chip to get him to
voluntarily reduce his salary - co-founders locked in a legal battle with
each-other are sure to sink the startup.

[1] [https://en.wikipedia.org/wiki/Self-
dealing](https://en.wikipedia.org/wiki/Self-dealing)

~~~
throwaway2019XX
Thanks for this link. It's clear to me that several actions taken are a breach
of fiduciary, but I had not read about self-dealing which does appear to be
happening here based on some other details that I have not mentioned.

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thiago_fm
I would discuss with him. If he can't give a good reason for the 3x salary
bump, I would already leave him with the company, as this seems very cheesy
and will likely continue and get worse. He would have to grow the company by
himself or find another tech person which would likely be hard.

What you would do though, it's up to you.

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throwaway2019XX
Based on the guidance here, I did find something called the "Entire Fairness
Doctrine" and that appears to be where the case would lie for the minority
shareholders including myself on the legal front.

That said, an internal legal dispute is going to crush this company right now,
and even a threat of one could cause a major fracturing. I have to weigh my
options because I'm years, not months into this and we've created a company
that has value. I cannot walk away and it would be a huge shame to stop this
company from growing further.

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rajacombinator
You should probably consult with a startup lawyer now, because your employer
(he does not view you as a cofounder) will try to screw you out of your equity
sooner or later.

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throwaway2019XX
Thanks I'm getting a referral from a friend who has a startup based on your
advice and others in this thread.

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ecpottinger
This sound like Commodore computers before it went bankrupt. The president and
some vice presidents were the highest paid people in the computer industry,
and there was no money for R&D. It did not take long for their competitors to
out perform them and take away their market share.

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throwaway2019XX
Thanks, I'll read up on this.

