Gravity Payments: $70k minimum wage (1 Viewer)

[cstu]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

 

[James Daulton]

Why are we so afraid to say that CEO pay is out of control in this country? I don't want to hear it's capitalism, free-market, whatever.

Why is it that when I throw something up in the air, it comes back down? I don't want to hear about gravity or whatever.

Everyone knows that the founding fathers really meant to put a limit on a person's upward mobility. They just forgot. Should have read "Life, Liberty, and the Pursuit of Happiness up to a point to be be determined by some guys on a message board".

Has it occurred to you that ridiculously high CEO salaries are hurting everyone else's upward mobility?

CEO salaries are a much lower multiple of the average worker's in Europe.

Does Europe have better corporate performance than the US? More upward mobility? A more sustainable economic situation?

Somehow German CEOs are able to survive on less than 1/2 of the multiple of their US counterparts. Their economy seems to be pretty strong, no?

It was an open-ended question.

European companies tend to be a lot more risk-averse than US companies and their executives tend to be under less pressure in general.

Germany is doing fine, and quite well relative to the rest of Europe, but structural unemployment is an issue there. The other thing to remember about Germany is that all other things being equal, a weak Euro is better for Germany than it is for most of the rest of Europe because Germany's economy is more levered to exports outside the Eurozone (benefits from a weak Euro) than most of its peers.

Also, the CEO pay in Italy, France and Spain is similar to Germany's. Those economies are doing a lot less well. (I don't think that you can make a straight cause and effect argument about any of this stuff).

I agree with you. I'm just noting that it's not unreasonable to think the US has gotten out of whack regarding CEO pay multiples (particularly when you look at ourselves across time) and this MAY have negative consequences for our economy. I'm not suggesting the impact is huge, just that when people (average worker) feel they're not being treated "fairly" (CEO makes upteen millions) it's likely not great for our economy.

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

This is a great post.

 

[James Daulton]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

Unfortunately this is also true.

 

[RedmondLonghorn]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

If the CEO being overpaid hurts the performance of the company they should care. If it doesn't, then they shouldn't. And if it doesn't then there isn't much to say about it one way or the other...

 

[Jack White]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

 

[IC FBGCav]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

Not even close to the same thing. There is not one player playing in the NBA that does not have NBA talent. There are CEO's in their position for many different reasons beside talent. Some just because they can be bought.

 

[Jack White]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

Not even close to the same thing. There is not one player playing in the NBA that does not have NBA talent. There are CEO's in their position for many different reasons beside talent. Some just because they can be bought.

So what?

These are for profit corporations. Their boards are free to appoint any CEO they choose, for any reason.

It's nobody else's business who they choose or how much they pay them.

 

[dparker713]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

Not even close to the same thing. There is not one player playing in the NBA that does not have NBA talent. There are CEO's in their position for many different reasons beside talent. Some just because they can be bought.

So what?

These are for profit corporations. Their boards are free to appoint any CEO they choose, for any reason.

It's nobody else's business who they choose or how much they pay them.

They largely choose how much to pay themselves. The collusion between executives has driven up their pay, not market forces.

 

[Jack White]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

Not even close to the same thing. There is not one player playing in the NBA that does not have NBA talent. There are CEO's in their position for many different reasons beside talent. Some just because they can be bought.

So what?

These are for profit corporations. Their boards are free to appoint any CEO they choose, for any reason.

It's nobody else's business who they choose or how much they pay them.

They largely choose how much to pay themselves. The collusion between executives has driven up their pay, not market forces.

Proof?

 

[IC FBGCav]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

Not even close to the same thing. There is not one player playing in the NBA that does not have NBA talent. There are CEO's in their position for many different reasons beside talent. Some just because they can be bought.

So what?

These are for profit corporations. Their boards are free to appoint any CEO they choose, for any reason.

It's nobody else's business who they choose or how much they pay them.

It is definitely the shareholders business. You are very off today. I would shut it down until tomorrow.

So what?

Your comparison with the NBA make zero sense.

 

[RedmondLonghorn]

Fortune 500 CEOs make what they do for the same reason the 500 guys in the NBA make what they do: supply and demand. The market determines this.

Not even close to the same thing. There is not one player playing in the NBA that does not have NBA talent. There are CEO's in their position for many different reasons beside talent. Some just because they can be bought.

So what?

These are for profit corporations. Their boards are free to appoint any CEO they choose, for any reason.

It's nobody else's business who they choose or how much they pay them.

They largely choose how much to pay themselves. The collusion between executives has driven up their pay, not market forces.

Proof?

Collusion is a strong word, but there is no doubt that overly generous CEO compensation policies have become epidemic among US publicly-traded companies. And that it is due to lazy, insufficiently independent, and undemanding Boards of Directors. And that is exactly the kind of board that most CEOs want to work for/with.

 

[cstu]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

If the CEO being overpaid hurts the performance of the company they should care. If it doesn't, then they shouldn't. And if it doesn't then there isn't much to say about it one way or the other...

If investors really cared then we wouldn't have the huge compensation for ceos. They understand the game and put with it as long as they get the return they need.

 

[hxperson]

There is definitely a bit of an old boys club at the top, especially when it comes to the boards and executives of most companies. That being said, a great CEO is worth every penny, regardless of what they make, while a bad CEO is a horrible misallocation of capital. That is not unlike most high profile jobs.

 

[Kal El]

There is definitely a bit of an old boys club at the top, especially when it comes to the boards and executives of most companies. That being said, a great CEO is worth every penny, regardless of what they make, while a bad CEO is a horrible misallocation of capital. That is not unlike most high profile jobs.

So how is this issue resolved?

 

[RedmondLonghorn]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

If the CEO being overpaid hurts the performance of the company they should care. If it doesn't, then they shouldn't. And if it doesn't then there isn't much to say about it one way or the other...

If investors really cared then we wouldn't have the huge compensation for ceos. They understand the game and put with it as long as they get the return they need.

See, I think your statement is just platitudes.

Most of the institutional investors I know, do care. But they also work at firms that do not allow activism.

And the bolded is garbage. I have been in the business a long time and I don't recall anybody ever expressing anything like that. All portfolio managers want their winners to return as much as possible, because they need to make up for their losers.

No, the problem is primarily that the largest pools of institutional capital haven't embraced an activist mindset at the top.

 

[cstu]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

If the CEO being overpaid hurts the performance of the company they should care. If it doesn't, then they shouldn't. And if it doesn't then there isn't much to say about it one way or the other...

If investors really cared then we wouldn't have the huge compensation for ceos. They understand the game and put with it as long as they get the return they need.

See, I think your statement is just platitudes.

Most of the institutional investors I know, do care. But they also work at firms that do not allow activism.

And the bolded is garbage. I have been in the business a long time and I don't recall anybody ever expressing anything like that. All portfolio managers want their winners to return as much as possible, because they need to make up for their losers.

No, the problem is primarily that the largest pools of institutional capital haven't embraced an activist mindset at the top.

They aren't trying to change anything - they just put their money where they think they'll get the most return. I didn't say they like it but they don't hate it enough to do anything about it.

 

[RedmondLonghorn]

I don't disagree that CEO pay has gotten out of whack. It really is a failure on the part of corporate Boards of Directors in demanding accountability. Which is unsurprising, in that those same boards are (typically) insufficiently independent.

It really falls on the large institutional investors to demand that corporate America institute better corporate governance policies.

Investors don't care if the CEO is making billions and the workers are getting minimum wage as long as they get their ROI.

If the CEO being overpaid hurts the performance of the company they should care. If it doesn't, then they shouldn't. And if it doesn't then there isn't much to say about it one way or the other...

If investors really cared then we wouldn't have the huge compensation for ceos. They understand the game and put with it as long as they get the return they need.

See, I think your statement is just platitudes.

Most of the institutional investors I know, do care. But they also work at firms that do not allow activism.

And the bolded is garbage. I have been in the business a long time and I don't recall anybody ever expressing anything like that. All portfolio managers want their winners to return as much as possible, because they need to make up for their losers.

No, the problem is primarily that the largest pools of institutional capital haven't embraced an activist mindset at the top.

They aren't trying to change anything - they just put their money where they think they'll get the most return. I didn't say they like it but they don't hate it enough to do anything about it.

Well again, as somebody involved in the industry I can tell you that the people who do the investing, do care. Their bosses and the firms they work for have a lot of disincentives against engaging in shareholder activism, however.

I also agree with hxperson that a truly elite level CEO is invaluable. And most of them end up actually being underpaid. But they are extremely rare. Those at the opposite end of the spectrum are a bit more common and are overpaid if they are paid so much as one thin dime.

The vast majority range from "meh" to highly competent. These days most of them are overpaid.

 

[Maurile Tremblay]

There is definitely a bit of an old boys club at the top, especially when it comes to the boards and executives of most companies. That being said, a great CEO is worth every penny, regardless of what they make, while a bad CEO is a horrible misallocation of capital. That is not unlike most high profile jobs.

I think there are at least three factors contributing to the runaway salaries of Fortune 500 CEOs.

(1) The most commonly given reason, and perhaps the least convincing of the three: it's an old boys club. The executives at one company are board members of another. They vote on each other's salaries, and even if there isn't an explicit quid pro quo in place, they all must realize that high pay for executives in general is in their own best interest.

(2) Companies try to avoid paying their executives a below-average amount because they don't want to signal to the world (i.e., to institutional investors) that they lack faith in their leadership. Ever since well-meaning regulations took effect that required public companies to disclose their compensation to executives, the companies that paid a below-average amount have sought to raise their executive pay up to the average. But this just creates a new, higher average, and the system works as a ratchet, constantly pushing the average upwards.

(3) Companies are bigger now than they have historically been, what with global markets and international trade deals and whatnot. This increases the value of a very good CEO over his peers, just as adding 1.5 PPR for tight ends increases the value of Rob Gronkowski over Vernon Davis. When a company is doing 50 billion dollars in annual sales, the marginal value of a CEO who oversees 5.3% annual growth over a replacement-value CEO who would have engineered only 5.1% growth may be about a hundred million dollars. The pay of CEOs has risen sharply over the past few decades because they are simply worth more now. (At least the good ones are, and companies are optimistic that their own executives will be good ones.)

 

[jon_mx]

This seems like an interesting social experiment. It will probably work out well for most. By there will be a noticeable disincentive to excell for many. I have paid employees too much before and instead of working harder to excell, they worked less and almost had an entitled attitude.

 

[Jack White]

So . . . how is that $70,000 minimum wage working out?

 

[cstu]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

 

[psychobillies]

So . . . how is that $70,000 minimum wage working out?

In his defense, there was no way anybody could have seen that coming.

 

[RedmondLonghorn]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

 

[cstu]

For Gravity, a firm that has appeared six times on Inc.'s annual list of fastest-growing private companies, the upside was a tsunami of publicity, most of it positive. And the publicity brought in sales. "Three months before the announcement, the firm had been adding 200 clients a month. In June, 350 signed up," notes the New York Times.

 

[dparker713]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I'm just waiting for them to call Henry Ford a communist too.

 

[RedmondLonghorn]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I'm just waiting for them to call Henry Ford a communist too.

Pretty sure he was a facist

 

[MaxThreshold]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I don't think anyone is wishing them to go out of business. If they go out of business it will be entirely on the CEO.

 

[IvanKaramazov]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

 

[xulf]

Hierarchical structure is needed in companies. This eliminates that to a large degree. A superior who makes as much as a subordinate creates a weird dynamic.

 

[Johnny Rock]

Besides the lawsuit, most of the other examples in the update are what I see happening with government forced minimum wage hikes and them being tied to inflation, but more easily seen with the larger dollar differences in the Gravity Payments case.

Reward the newest workers, worst performers and least senior.

The best people leave or become disgruntled because they know they're worth more than the newcomers, lesser performers and subordinates.

Workers are deprived of the feeling of "earning" their raise.

Their individual pay is no longer private if they want it to be.

Clients wonder if their fees could be lower with a competitor because surely a new mailroom worker or Admin Asst. doesn't need to make $70k?

 

[GoFishTN]

So . . . how is that $70,000 minimum wage working out?

The new pay scale also helped push Grant Moran, 29, Gravity’s web developer, to leave. “I had a lot of mixed emotions,” he said. His own salary was bumped up to $50,000 from $41,000 (the first stage of the raise), but the policy was nevertheless disconcerting.

Not sure how they'll make it without this Einstein.

 

[RedmondLonghorn]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

 

[James Daulton]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

 

[James Daulton]

Also, for the mangers who left, what did they gain? Were their income somehow more limited by this move? Were their future earnings negatively impacted. Did they leave out of "principle"? If so, #### them. The company may be better off in the long run.

 

[RedmondLonghorn]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

That's our impression from the outside. Maybe inside the company the view looks different.

The thing that can't be discounted is that humans tend to be naturally compeitive and very high achievers tend to be more compeitive than average. Certainly there are exceptions, but on the whole it is the case.

 

[roadkill1292]

So . . . how is that $70,000 minimum wage working out?

The new pay scale also helped push Grant Moran, 29, Gravity’s web developer, to leave. “I had a lot of mixed emotions,” he said. His own salary was bumped up to $50,000 from $41,000 (the first stage of the raise), but the policy was nevertheless disconcerting.

Not sure how they'll make it without this Einstein.

Indeed, the guy is being paid $12,000 above market and he's disconcerted. He's not competing against the janitor, he's competing against other web developers in his area. I don't think he'll be very hard to replace.

The real push back is coming from competitors who see this company driving up the price of labor. I've been through that. Sucks to be them.

 

[jonessed]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

 

[BowieMercs]

So what happens when these folks inevitably leave the company and venture back into the real world?

Not sure what you are getting at. What happens when anyone leaves a company? Your skill set is worth something and he just happens to compensate more than most other companies. If you want to leave, you are foolish to assume you'd be paid a similar salary elswhere.

Sure, it's easy to say that from the outside looking in, but people are going to get used to the lifestyle that the $70k salary gives them. When they're really worth a $40k salary, they're going to have a big adjustment to make when they leave the company.

Its a cool idea on the surface, but I think it's dangerous too.

why would they leave?

Exactly. Assuming you have good staff, you want to avoid turnover as much as possible. This would certainly help retain the people elevated to 70K. Can't say anything about the people at or above 70k now

 

[CBusAlex]

The real push back is coming from competitors who see this company driving up the price of labor. I've been through that. Sucks to be them.

Seriously. How badly do you have to misunderstand economics to see a bunch of other business owners complaining that they just can't compete with Gravity because of their wage structure, and conclude that that's a sign of a failed practice?

 

[James Daulton]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

 

[jonessed]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

Seems clear from their comments that they left because they felt the money set aside for pay rises was distributed inequitably. That's a pretty common reason to leave a company.

 

[roadkill1292]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

Seems clear from their comments that they left because they felt the money set aside for pay rises was distributed inequitably. That's a pretty common reason to leave a company.

So the better choice is to leave the company for another one that pays less? I see a lot of people here buying into that line of thinking but my mind simply doesn't grasp how it would be better for me.

 

[James Daulton]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

Seems clear from their comments that they left because they felt the money set aside for pay rises was distributed inequitably. That's a pretty common reason to leave a company.

So the better choice is to leave the company for another one that pays less? I see a lot of people here buying into that line of thinking but my mind simply doesn't grasp how it would be better for me.

The CEO reduced his salary to increase the pay of low wage workers. This was how the dollars were intended to be distributed. The folks who left may have viewed it as not being equal, but the purpose for the money was not to give overall pay increases but to increase those lowest on the pay scale. It seems to me like people are getting butt hurt about someone else getting a huge raise when they're not. They're leaving a company that gives a #### about their workers. Unless they're leaving for substantially more money, it seems counterproductive to me.

 

[Hang 10]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

Seems clear from their comments that they left because they felt the money set aside for pay rises was distributed inequitably. That's a pretty common reason to leave a company.

So the better choice is to leave the company for another one that pays less? I see a lot of people here buying into that line of thinking but my mind simply doesn't grasp how it would be better for me.

Maybe they left to go to a company with potential to earn more money. They just made the logical conclusion that paying new people and less productive workers 70K, it was putting a cap on their earning potential.

 

[jonessed]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

Seems clear from their comments that they left because they felt the money set aside for pay rises was distributed inequitably. That's a pretty common reason to leave a company.

So the better choice is to leave the company for another one that pays less? I see a lot of people here buying into that line of thinking but my mind simply doesn't grasp how it would be better for me.

No. Not unless they had some other investment in the success of the company or had better career progression elsewhere.

Where are you getting that their compensation is now less?

 

[BowieMercs]

Didn't Ray Noorda @ Novell limit his salary to something stupidly low? Of course he was worth upwards of $600M so I guess he didnt need a salary

I think it was a signal to his upper management who wanted more money.

Or maybe my alzheimers is mis-remembering this whole thing.

 

[RedmondLonghorn]

Didn't Ray Noorda @ Novell limit his salary to something stupidly low? Of course he was worth upwards of $600M so I guess he didnt need a salary

I think it was a signal to his upper management who wanted more money.

Or maybe my alzheimers is mis-remembering this whole thing.

There are quite a few CEOs who take very low salaries. They tend to be founder types who have massive equity ownership.

Jeff Bezos had a salary of $81K last year. His total compensation was about $1.7 mm because Amazon spent $1.6 mm on security arrangements for him. $81K is low for an upper level executive of a mid-sized company, nevermind a CEO of a giant company. Even the full $1.7 mm is extremely low for the peer group.

Of course he personally owns a huge chunk of AMZN stock and is worth like $30 bln because of it.

And keeping cash comp down is part of the company's strategy:

Amazon said it pays leaders minimal salaries -- the highest is $175,000, for Senior Vice President Diego Piacentini -- as part of its philosophy of tying total compensation to long-term shareholder value.

 

[dparker713]

i.e. - they're throwing a hissy fit.

 

[hxperson]

There is definitely a bit of an old boys club at the top, especially when it comes to the boards and executives of most companies. That being said, a great CEO is worth every penny, regardless of what they make, while a bad CEO is a horrible misallocation of capital. That is not unlike most high profile jobs.

I think there are at least three factors contributing to the runaway salaries of Fortune 500 CEOs.

(1) The most commonly given reason, and perhaps the least convincing of the three: it's an old boys club. The executives at one company are board members of another. They vote on each other's salaries, and even if there isn't an explicit quid pro quo in place, they all must realize that high pay for executives in general is in their own best interest.

(2) Companies try to avoid paying their executives a below-average amount because they don't want to signal to the world (i.e., to institutional investors) that they lack faith in their leadership. Ever since well-meaning regulations took effect that required public companies to disclose their compensation to executives, the companies that paid a below-average amount have sought to raise their executive pay up to the average. But this just creates a new, higher average, and the system works as a ratchet, constantly pushing the average upwards.

(3) Companies are bigger now than they have historically been, what with global markets and international trade deals and whatnot. This increases the value of a very good CEO over his peers, just as adding 1.5 PPR for tight ends increases the value of Rob Gronkowski over Vernon Davis. When a company is doing 50 billion dollars in annual sales, the marginal value of a CEO who oversees 5.3% annual growth over a replacement-value CEO who would have engineered only 5.1% growth may be about a hundred million dollars. The pay of CEOs has risen sharply over the past few decades because they are simply worth more now. (At least the good ones are, and companies are optimistic that their own executives will be good ones.)

I don't disagree with any of this. However, I have found that the most egregious over pay's that I have seen, whether they be through companies that I have worked for or companies that I have invested in/observed (as an institutional investor), have largely been instances where the executives have too much control over the board (usually CEO is good friends with the key shareholders) and have free reign to pillage as much capital as possible out of their respective sinking ships.

The destruction we've witnessed over the last 3 years in the mining industry has resulted in plenty of examples of this.

 

[hxperson]

So . . . how is that $70,000 minimum wage working out?

The sick thing is all the twisted Randians wishing the company goes out of business and for those people to lose their $70k jobs - all because the CEO out of his own choice decided pass his salary on to them.

I certainly didn't wish to see anybody lose their job, but it is sorta neat to see theories I learned in Economics classes work in real time. And quickly too.

I don't think there's anything in economic theory that says that a company will go out of business if its CEO altruistically pays his employees more out of his own hide.

The power of economics lies in its assumption that people tend to behave in a self-interested manner, which is factually true 99.999% of the time in these sorts of settings. Economics clearly predicts that the equilibrium wage will not settle in at $70K, for example. But if somebody wants to be more-charitable-than-necessary toward his own employees, there's no reason why he can't succeed in doing so, at least with regard the economics of the situation. (The politics is a little different, and again involves non-economic reasoning).

I'd like to think you'd know me well enough to give me credit for not simplistically suggesting the bolded.

My underlying point was actually echoed by you later in your post. Equilibrium wages for entry level employees aren't close to $70,000. I think the interesting economic outcomes are the distortions and unintended consequences that come along from forcing the entry-level wages to far past the equilibrium level.

That is to what I was referring.

Here's what I don't get. These managers are so pissed that they're paid close to someone who's under them that they'll leave a company where the CEO actually gives a #### about the workers? How many companies these days have a culture where this is the case? I'd bet they're few and far between and I'd also be inclined to stay where the CEO showed a proclivity to reward his workers. What if he decides to give middle management a significant increase down the road? The workers who are leaving seem shortsighted to me.

The employer chose to limit their pay increases so another employee could earn more. Seems like a good enough reason to leave. Happens all the time.

I must have missed where this was noted. I thought I read that the folks > $70k received increases as well, just not as large. Is there now some $70k ceiling at the company?

Seems clear from their comments that they left because they felt the money set aside for pay rises was distributed inequitably. That's a pretty common reason to leave a company.

d.

So the better choice is to leave the company for another one that pays less? I see a lot of people here buying into that line of thinking but my mind simply doesn't grasp how it would be better for me.

It could be a better choice if the company you are leaving is a sinking ship. If you are young and a high performer, sticking around for an extra 10-20K over your potential salary for a year while missing out on a better opportunity elsewhere seems very short sighted.

A CEO's primary responsibility is to convince customers and investors/lenders to give the company money. His/her #2 responsibility is to motivate the employee base and increase productivity as much as possible. Gravity Payment's CEO seems to be failing pretty hard at both of those things. I wouldn't stick around for that.