
CEO cuts his pay by almost $1M to give his employees big raises - lavamantis
http://www.latimes.com/nation/nationnow/la-na-seattle-ceo-pay-20150415-story.html
======
sickpig
This 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.

~~~
mayukh
The NextDraft effect ?

~~~
sickpig
Dave 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".

------
brianfitz
I 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
You 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.

~~~
PopsiclePete
Especially 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.

------
icpmacdo
Given 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.

~~~
tallgirltaadaa
this is my second time seeing it, and i still dont remember the company
name... soooo maybe not

~~~
cookiecaper
That's because no one is mentioning the company name -- it's just nameless CEO
gives nameless employees more money. The company is Gravity Payments.

------
bko
This 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.

~~~
officemonkey
Think about it: how much does the lowest paid staffer make there? 25,000?
30,000? These lower-paid staff will be very loyal, because they're getting a
very significant and possibly life-changing raise. They're not going to quit
on you, and they're not going to kill the golden goose.

Recruitment has real costs. Hiring and training, and dealing with the hiring
mistakes you make, all cost money. Having a happy staff saves a lot of money,
time, and headaches.

~~~
rhino369
I also wonder if this company even has low paid staffers. The business I work
for doesn't directly employ anyone under ~60k. Instead the kitchen staff, the
cleaning people, the mail room, document processing people, etc. etc. are all
contracted out.

~~~
JTon
Actually, it's a significant chunk. From the article:

> After Monday's announcement, anybody making less than $50,000 -- more than
> half of the company's 120 employees -- immediately got bumped up to at least
> $50,000, according to a company spokesman. The minimum will increase to
> $60,000 by the end of 2016 and $70,000 by the end of 2017.

------
IanDrake
Pay? 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".

~~~
pc86
Well he owns the entire company, so theoretically he could take a disbursement
of 100% of profits if he wanted to. Realistically a large portion of that is
almost always reinvested in the business. Besides, which one is "more fair" of
the two options (from this story specifically):

\- A CEO makes $1MM and owns 100% of a company making $2MM in profits every
year.

\- A CEO makes $1.00 and owns 100% of a company making $500K in profits every
year.

Regardless of how large his profits disbursement is, he's intentionally
putting himself in a worse financial position so that the majority of his
employees get a massive pay increase in an expensive urban part of the
country.

Just because it's a good PR move doesn't mean it isn't also a good move in
general and a good move as a human being.

~~~
cookiecaper
>a good move as a human being.

Giving people more of what they want is not automatically the correct move. It
may sometimes be the correct move. You can cause a lot of harm by giving
people what they want when they shouldn't have it. Look up info on how most
people handle lottery winnings if you doubt this.

There are many less optimistic ways to interpret this change, and there may be
some fallout down the road. I wouldn't jump straight to "a good move in
general and a good move as a human being".

------
AndrewKemendo
This 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
If 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.

~~~
AndrewKemendo
What 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.

~~~
JoeAltmaier
Why on earth would a janitor position 'move up in skillset requirements'?
That's speculation that I don't see supported, and can't quite imagine how it
would work.

------
blfr
Previously
[https://news.ycombinator.com/item?id=9371854](https://news.ycombinator.com/item?id=9371854)

------
jamiesonbecker
Henry Ford did something similar a century ago:

[https://en.wikipedia.org/wiki/Henry_Ford#The_five-
dollar_wor...](https://en.wikipedia.org/wiki/Henry_Ford#The_five-
dollar_workday)

------
mgkimsal
A 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+?"

------
mhassaan
This blunt move can get him loyalty in return ,which itself is a requirement
for taking his business one step ahead .

------
crimsonalucard
What about options? Does the CEO get options that raise his wage to a height
that is still unfair?

~~~
CapitalistCartr
"Price, who started Gravity Payments out of a dorm room when he was 19, wholly
owns and operates the company . . . "

Besides, what is fair?

~~~
Rainymood
No it's not fair, he doesn't deserve that company he put his whole life in!
Nobody deserves such a thing!

\s

~~~
crimsonalucard
Makes 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

------
dataker
What 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.

------
AC__
Imagine 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.

~~~
pc86
I think they've tried that in a couple places already.

~~~
AC__
Please don't conflate contributionism with socialism or communism.

------
chatmasta
Ten 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
Great! 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!

~~~
chatmasta
The problem is it's unsustainable. The employees aren't providing $70k of
market value. The CEO is changing his pay to attract attention and build
customers. Companies are not going to adopt paying 2x market salary as a
standard business practice. If people will work for $40k then that's where the
costs will "gravitate" (hah) to.

~~~
dragonwriter
> The problem is it's unsustainable. The employees aren't providing $70k of
> market value.

How do you know this? Sure, if you make the assumption that the before this
one change, the world worked perfectly in line with the kind of simplifying
assumptions that you might see in an Econ 101 class, then that would be true,
but then, if the world worked that way, _this raise wouldn 't have happened_.

~~~
chatmasta
Because they were willing to work for $40k.

~~~
dragonwriter
> Because they were willing to work for $40k.

That doesn't mean that they weren't providing $70k of market value, unless you
assume that (at a minimum):

(1) they were maximimizing their pay in choice of job, and (2) they had
perfect knowledge of all the alternatives jobs that they could otherwise have
obtained.

These are the kind of assumptions that are typical in Econ 101, but to which
real humans do not actually conform, particularly the second.

------
rebootthesystem
Despite 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
The 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?"

