CEOs have way more latitude than most think. There is an incredibly easy argument to make in this case: paying employees more means you get better employees, and more productive employees, thus you drive more shareholder value.
Any education or education in specific fields or courses of study?
I suspect you'd get the most RoI on education related to what the economy needed at the time. However if the market is compensating employees fairly* then students will likely pick what enjoy doing which also best fits the needs of the economy (as dictated by the benefits of the job).
*For example, when you have to hire employees from out of nation requiring that they make 2X or more of the median pay for the job in that area, and also allowing this valued employee to freely take any other similar offer (2X median pay in the area of the job) as well as have a fast track to citizenship.
The problem being that much education has a minimum of 4 year lag time. So one could go into a degree program when the market is hot, only to see it cool off by the time they graduate.
Citation? As I understand it this company is not doing specactularly (revenue up, but profit down a bit), but, more important, employee happiness is down to pre-$70K levels.
http://www.usatoday.com/story/money/2016/05/26/does-70000-mi...
So, at the cost of growing a little less quickly than they might have, the employees that are building the company up are enjoying a drastically improved quality of life.
The company isn't failing, the investors aren't losing their shirts, and the human beings who are making the day-to-day operation of the company possible, are better off. Sounds like a win-fucking-win to me.
> Employee turnover fell 19% last year compared to the average of the past six years. Gravity has been flooded with 30,000 applications, up from an average 3,000 or so a year. A monthly company survey that gauges employee happiness found a bump just after the announcement but then a drop to pre-$70,000 levels – consistent with a widely-held theory that people return to a baseline level of happiness despite positive or negative life events.
Still, Pirkle says the raises have allowed employees to move closer to the office and cut commute times, and plan for the future without living paycheck to paycheck. Retirement account contributions are up 130%, more employees are buying first homes and 10 are expecting, up from a typical zero to two each year.
What's insane is some of the lawsuits that succeed.
If he made a change on compensation not based on the interest of the company, then the other shareholders should be allowed a say.
You do need committed investors, but even if you have investors cashing out it may be better for the company that they leave when you look at things on a 5-year or longer timescale.
It's interesting that you critique gp's comment for being binary, but you also make an absolutist comment yourself by stating "there's no reason" in:
>But there's no reason that a company paying out 100% of earnings to its employees can't outperform a company paying out less year-over-year. ... it may be better for the company that they leave when you look at things on a 5-year or longer timescale.
Instead of "no reasons", there are several reasons why a company paying out 100% of the profits to employees for 60 months will make it underperform another company that retains some of its earnings. A company can use its retained profits to spend on future expansion, speculative research & development, acquiring a company, etc. In many industry segments, if the company doesn't grow, it becomes irrelevant and dies. (At that point, the jobless employees get 100% of $0 profits.)
I can't think of any example in business history of a company that paid 100% profits to employees and therefore had $0 in retained earnings year-after-year ... outperform its competition.
I'm not saying that paying min 70k is beyond this point where paying them won't help you on T time scale, but it needs to be evaluated. You can't just assume that paying someone more will be more than made up for in increased long term efficiency.
The CEO may very well be able to make a case for higher wage workers even in the "greed-above-all" context of shareholders.
FWIW, 70K "min wage" might not mean so much if most employees are line workers and there are contractors for the support jobs (eg IT-dept, janitorial, secretarial, etc).
Isn't more driven by market forces of supply and demand. Why should CEO make his business to interfere with systems that are in place to deal with this.
A more convincing argument is 'publicity'.
Except in this case, quite the opposite happened. All of the company's best employees quit and walked away within a few month's time.
This left only the newest hires running the ship - collecting, in some cases, more salary than the seasoned crew that had been there from the start and had to work their way up the pay ladder.
[1] http://www.businessinsider.com/dan-price-gravity-payments-em...
So I looked at Glassdoor[0] and the trend looks like after 8/2015, when this article was published, there is a sharp uptick in employee reviews. So far it appears almost everyone is happy with the change (customers, employees, and management).
[0] https://www.glassdoor.com/Reviews/Gravity-Payments-Reviews-E...
If "the best" employee in a company quit because they were philosophically opposed to a new client's business, most would cock an eyebrow, think they were inflexible or committed, and move on. I find it extremely interesting that instead, a philosophical disagreement about cow-orkers' salaries is apparently considered very differently by some.
The CEO got really good personal PR. The new hires got huge raises. The employees that had toiled long hours and built the platform got nothing.
That's not somehow petty, nor jealous. Let's not demonize the employees that decided they were not going to be part of that company anymore - a company that showed it wasn't going to reward hard work and dedication. Most of us would have made the same choice.
No one bats an eyelid when a company hires a new unicorn, 10x developer. It's equally possible that raising the salary also allowed them to hire 10x employees and the old hires were feeling threatened so left.
We work with data, if I don't feel I'm compensated fairly I write a letter complete with numbers saying what my renumeration should be. And forward that to the manager and HR.
We're discussing previous articles about this company.
> No one bats an eyelid when a company hires a new unicorn, 10x developer. It's equally possible that raising the salary also allowed them to hire 10x employees and the old hires were feeling threatened so left.
That's not what happened here. No "10x developer" was hired. It was literally just a huge pay raise for the newest employees, and shafting the ones that had been there for years.
It turned from a merit-based system into one that valued everyone equally - and while this sounds great on the surface, not everyone contributes equally. Those that built the platform really felt like they got the short end of the stick. New hires, who put in none of the effort to get the startup up and running, had none of the knowledge nor domain expertise, suddenly were earning as much as the most senior engineers.
Not to mention the entire thing reeked at the time as one big PR stunt, since it didn't "just happen" one day, but rather the media was notified and it turned into a big fuss. It seems the stench had some credence given this lawsuit.
> We work with data, if I don't feel I'm compensated fairly I write a letter complete with numbers saying what my renumeration should be. And forward that to the manager and HR
This statement seems like hyperbole to me. I imagine few managers respond well to threats or begging via email about salary. Nevermind pointing to what other people get in a market for compensation is a terrible way to value yourself. You should start these discussions with how much value you bring to the table, not what others at other companies may or may not bring to theirs.
No, it wasn't. There was no "shafting" involved. Phrasing it that way shows that you're just as petty and jealous as those others. Someone else getting paid well does not take away from your worth.
"It turned from a merit-based system"
Payroll has almost never been a merit-based system, so any arguments about that are deeply flawed.
http://www.businessinsider.com/dan-price-gravity-payments-em...