Forums: Discussions for entrepreneurs and small business.

In a closely held C-Corporation where the CEO is also the majority, if not 100%, owner of the company, the wages paid may be reflective of a return on investment as well as wages.  However, wages are inflated to avoid double taxation on dividends. 

The other issue is that of agency and moral hazard with regard to someone who has no risk in the game.  This can also be seen in the issues between the UAW and the car companies.  A company can not be profitably run if it is primarily run for the benefit of its employees because the employees do not generally realize that the health of the company is tied so closely to their own profitability.  Rather, they see the company as a piggy bank or ATM machine that is supposed to fork over the cash when they want or need some.

I understand the arguments for employee retention, so pay them what they`re worth or a bit above market if you don`t want them looking around, but don`t let them start thinking they can or should raid the company`s treasury. 



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Shane Eloe, CPA
http://numberinsights.com

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Thank you,   
Nelson
Accessmount LLC
www.accessmount.com   
Easy maintenance, "Ladderless" Light Fixtures

I am in the Elevator Pitch Contest! Please vote for me

OK, I have to write this.

Is the premise of the question that only our Beloved, Caring, All-Seeing Government Officials are the only ones who can make millions?

 

Up-Start Sheeple Nation

This latest trend towards New Totalitarian Marxism is getting tiresome.

At what point are we Sheeple going to demand the Government nationalize everything?

 

Is the New and Improved way to become a successful entre-p-manure to know the right extortionists and get in on the latest Marxist mandate at the ground floor? - Create a mandate; invest in it; drive the herd of Sheeple into it.

 

barkwheats,

Here`s a very recent article from Paul Graham, whose business is helping technology start-ups get going.

http://www.paulgraham.com/credentials.html

A very quick gist of the article is that things are changing, and quickly.  Where industry used to value the size of the company and the seniority of the employees, smaller companies are making it harder for non-performers to hide as dead weight while at the same time allowing people to show what they`re worth through their performance.

As these trends continue (and as long as they are allowed to), they will address the inequities of the current system without the need for artificial caps or governmental interference.  He also demonstrates some dynamics that appear to be causing this movement, which may give clues on ways to help it move forward while building a stable business.

I commend you on your feelings for the members of your organization, whatever size it may be.  That shows the beginning of wisdom, or the "why to do".  All you need to complete it is a solid "what to do" that builds on it.

I`ll also join with some others here in urging you to understand that the perceptions and realities of running a business can be two very, very different things.  As you search for your "what to do", also work to address this issue, and you`ll find that your employees can understand a lot more that happens than they usually have access to know, and more than anything else, it`s not knowing that leads to dissatisfaction.

As an aside, I heard recently that some technology start-ups have taken to offering employees a cash bonus to leave.  It starts out fairly small, but grows proportionally to the time that they stay.  The theory behind this (and it seems to be working rather well) is that if the money is more valuable to them than the contribution they are making, it`s better for the company and the employee to part ways so both can continue their growth.  The bonus just serves to promote an understanding that leaving is healthy and expected and to make it a happy event when it does happen.

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