Forums: Discussions for entrepreneurs and small business.

Hi,

In Indian Government Sector, the highest paid executive (who might have taken equal or more risk than few of the CEOs in their Administrative positions and spend more than 2-3 years of their lifetime thinking about nothing other than the Civil Services Exams) gets just 12 times the salary of the lowest paid executive.

Infosys chairman Narayanamoorthy was quoted as saying a 1:50 ratio would be healthy.  But we are talking about balance between socialism and capitalism here, neither did Russia succeed in Communism, nor did US sustain its capitalistic claims (when they are "almost" nationalising banks).  Even in a company I beleive we cannot be 1:12 or 1:20 which would be socialistic, and we cannot be capitalistic and say, hei.. lets not look at his salary he is above us... I think I will go with 1:50 (this being a strict ratio including perks and benefits)

To answer your wage gap I have a startup firm that I do not get paid at all only my employees do.

-------------------------

Anthony D`Ambrosio
Founder/President
Restaurant Reservations Dot Com, Inc.
(718)874-2490 Office
(718)605-7808 Office-Alt.
(480)287-8525 Fax
Anthony@RestaurantReservations.com
www.RestaurantReservations.com

To be honest, this has unintended side effects.  Compensation is a VERY complex topic and requires an enormous amount of careful thought in order to prevent serious problems down the road.  If your CEO is earns $200,000 a year and your receptionist earns 50,000, then you`re doing a good thing, right?  Well, what happens if you go under?  Your receptionist may not be able to earn enough to afford the house, car, college educations and everything else she`s funding.  You`ve actually ruined her life!

What happens when the company is earning 2x more in profit?  Who gets to keep that?  Is it spread around among the employees as a bonus and/or is it paid to the stock holders? Is it simply donated to charity? Would your employees want their hard work donated?  What`s the incentive to work harder next year if they don`t get to keep it?  If they do keep it, how can they not become accustom to getting paid many times market rates?

Imagine the case where you have someone with basic office skills pulling down $100k a year and spending like it. They`re completely and utterly dependent on you.  They have no other way to earn that money except through your good graces. That is a VERY bad thing.  It`s a kind of high paid slavery and can destroy lives, even if the intention was good.

So, you really should not pay people too far above market rates for their skills.  So you have role inequity, but not market inequity.  See what I`m saying?  In a perfect world, I`d run a company with 100 equal partners all at my level and ALL bringing in huge value.  We`d share it evenly.  Each could go off and run their own company and earn close to the same income if they wanted.  We`d be together for mutual benefit.  But if the market rate were TOO far off the mark, then those people would be attatched and cling to the business for fear of losing their lifestyle.

Just saying, be careful here.. deeply analyze the consequences of every compensation model.

Very good point snoonan.  Bark... I do love your charitable spirit though.  I have owned my own company for several years now.  We are not rolling in dough but just barely getting by but my dream is to "pay my employees well" if and when I can.  I don`t plan on capping myself but I do want them to be paid above what market is because I personally don`t think that is enough.  I commend you Bark for being willing to share in the wealth you may one day create.

-------------------------

Shane Allen Co-Owner, Dynamic Solutions

Barkwheat,

I`m not sure if this is the type of information you are seeking but the CEO of Costco makes 12x what the average employee there makes. He has been interviewed about it often and says he set it that way because he felt that was fair.

As a CEO (and founder) you have to do what works for you. 

I`ve told you a million times not to exaggerate!

I believe the term CEO, used at a forum called "Startup Nation" might be a little presumptuous.  If you are paying yourself  20, 30, or 40 times (as "CEO") the least paid worker--then you have one hella business and I would like to invest.  Current minimum wage is $6.55/hour.  This would be a "CEO" wage range of  $131 to 262 /hour. (or 250-520K /year).

If you are paying the bills and paying yourself that kind of salary--good on you. 

As a former cubical/dilbert/software/employee--I did not worry about what the owners of the company made.  They took the risk and started the company--and gave me a job.  What they did to make working there enjoyable was, profit sharing, yearly bonus, and a very, very, large 401K match (2 to 1 - the one being my dollar).  Also, they had a very relaxed work environment.  It was a pleasure to work there.  (then the company got bought out-sigh).


-------------------------

brake-fast Dog Food Bowls
"Slows the Chow Down"
2006 "Editor`s Choice" Award, Dog Fancy Magazine for Innovation and Creativity
2006 "Editor`s Choice" Award, Pet Product News

Thanks all for the great replies!!  Of course, snoonan, I do think about the overpaying thing.  I wouldn`t want someone to be reliant upon my business.  If I`m paying a little above the market wage for an area for the lowest paid employee, then that helps to bring the whole community up.  What happens if the company goes under?  Well, that doesn`t matter if there`s a wage gap in place or not.  :)  I do see your points and appreciate the input.  Thank you!

Ladderless...I`m talking about the salary only right now.  Maybe I`ll look into this for the entire take home pay...maybe not.  I`m just exploring right now to see what others do.  I believe, too, in wages for a job done being different from taking on a risk.  Thats a good question on how to merge the idea into the entire earned income...or not.

DynamicSolutions... THANKS :)

skvignesh, thanks for your input.  Good to know what other countries do, too.

smile999, had no idea about Costco!  Pretty darned cool, I`ll have to look it up.

And mbkitchen... I do hope you were kidding about telling me a million times not to exaggerate.  I don`t know that we`d ever conversed before.  And why would you say that using the term CEO on startupnation is presumptuous?  It`s a title that has to be written in the articles of incorporation or organization (for those llc`s). 

For what it`s worth, I don`t have any employees right now.  I`m wanting to make sure I build my business right from the start and implement the correct strategies as I grow the business.  I would have no plans of paying just minimum wage, but rather pay a living wage for whatever area I`m hiring in.   Minimum wage to me is a complete load of BS. 

Thanks all for the replies! 





-------------------------

Barkwheats Dog Biscuits
-all natural, maine-made buckwheat dog biscuits

Just got wind of this CEO discussion. Barkwheats, I believe you are focused on CEO`s from very large companies. did you ever consider that an entrepreneur or small business person who runs their own business fits the definition of a CEO?
I know that yo9u have said that you are not demonizing CEOs, but to those reading your bent, you are.

I am the regional director of an organization that re-branded it`s name to CEO Space in 2006. Many of our members were very upset that we changed the name. Why? They had a similar mindset as you. Whenever you mention a CEO you think of the greedy SOBs that run the large corporations, the ones that have been ruining the economics of this country.

Our orgainzation works with the CEOs of small to mid size businesses to help them accelerate business growth. They work from a cooperative model not the greed infested competative model. Often, as start-ups they are the only "employee".  At that level, if you didn`t dig enough to see what you are truly dealing with, that greedy little bastard gets 100% of the earnings. Can you imagine that? That CEO gets 100% of the earnings of thir own company. Of course that may only be $30 to $40 thousand/year. Not to mention that there is a very high % of small businesses that don`t ever make it. They fold before they ever get a chance to be greedy.

It would assist those reading your posts if you began to qualify what CEOs you are actually focusing on. Are these the CEOs of the large corporations? If you were able to develop a full spectrum of CEOs from Start-ups to large coorporations, I beleive you would see a great deal of difference.



-------------------------

Rob Adams
CEO Space Northeast Regional Director
www.ceospace.net
www.ceospace.biz
www.ceospacenortheast.com
302-698-1709

The beauty of owning your own company is that you get to set policy.  So as the owner, you want to set it up so that the CEO only gets 12x the lowest paid worker, go for it!

The problem that I`ve seen with this mindset is that typically it is not limited to one`s own company.  This gets adopted as some social cause and then legislated into a law.  What used to be perfectly legal business relationships become illegal and criminalized.

I run my company a little differently.  Everybody that works for me gets minimum wage.  However, not me.  I`m always the last to get paid, if at all.  Period.

Then I add in bonuses for being on time, staying at the job all week, skill level required by the job, performance and quality of the work done, customer satisfaction, no rework/recalls.

Bottom line is everyone gets to set their own salary by the way they perform the job assigned them.  Nobody makes minimum wage for long.  They either produce or leave of their own accord.

As the owner, I get what ever is left over.  And that is my compensation for being a good or poor manager.

There have been several occasions before I adopted this pay structure that I would have gladly traded places with the people I was paying.  Let them deal with the employee BS and they pay me the wages.  I`d come out ahead.