Quote:
Originally Posted by Chili_Wango
While that is disturbing, it's difficult to include factors when discussing production; i.e. advancements in technology. If you make a machine that can increase the output of products by 30%, the worker isn't necessarily working any harder, it's the machine. So why should the worker be rewarded? Then again the poor fellow is most likely be making jack shit in the first place while is CEO rakes in millions.
Like I said in my previous post, I find it difficult to demand that my CEO give me money, money he earned; but how can he/she justify hoarding the wealth why giving everyone else the scraps?
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You're leaving out the risk factor. Take my company as an example. We're 4 years in business now. I put every penny I could into getting the business off the ground. Yes, I bootstrapped it. The silicon valley model is a whole different game.
I took no salary and lived off savings the first two years (Year 2 I was in Afghanistan). Year three I took a salary that was roughly 1/4 of what I could have earned on the open market. This year I am making slightly less than 1/2 of what I can make working for someone else. At the rate I am going, it will be year 6 before I even come close to salary parity. BUT, if I can continue to grow the company, there will come a point where I will be able to make MUCH more than I would working for someone else. Yes, if we have the profits, I will take a very large salary. Much more than anyone else in the company.
But I am also the one that took the risk. Everything I own is on the line and if the company fails, the impact to me personally will be very very severe. I'm happy to share in the wealth. I've never had an employee make the same or less than I do. But when the day comes that I can afford to make my salary right, shouldn't I?
Now let's talk about management other than a founder. When you are talking about a Senior Manager, a VP, a Director or a C-Suite occupant, you are talking about someone that the person taking all the risk (me) has delegated the authority and responsibility for running a portion of the operation. If they screw up, my personal future is impacted in a big way. A really bad decision by that manager could very well cause me to lose everything and go bankrupt. I want to have someone I can trust in that position. Joe Snuffy just isn't an option. I want to attract the best person I can possibly afford for that seat. I also want that person to have a vested interest in the company so that they are incentivized to do the very best job they can. The best way to accomplish both ends is in the form of bonuses, options and compensation packages where the amount is tied directly to the company's results. If the company loses money, they lose money (to a point). If the company makes money, they make money. Once again, they are being compensated for the risk they are taking. Bear in mind those managers are taking lower salaries in return for the bonuses.
The other side of this is the worker. Very few workers have direct impact on the overall welfare of the company. The bigger the company, the less impact the individual worker can have. Yes, they can impact the operations, but if the company has good checks and balances in place, typically they can't impact the well being of the company.
So my question is: After putting the difference in risk in perspective, do you still believe that the compensation levels should only be slightly different between the two roles?
The only (major) difference related to this discussion between the example of my small company and the big boys that are traded publicly is the ownership. I own my company and shareholders own the public company. Other than that, there isn't that much of a difference in the reasoning behind compensation plans. Yes, the plans are different, but the reasons for the incentives are still the same. (For you purists out there, I'm ignoring the senior managers that have incentives through M&A)
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