What the everliving hell am I reading from you guys? You think this is a good idea for this company? YES this is exactly 20th century motor company.

First off, he's CEO, not sole owner as far as I know. So he can't take ownership distributions, unless I'm misunderstanding things.

Second off, you can pay people a billion dollars a year, but if they don't get their raise they "deserve" every year, they're going to be pissed. Every single one of the $25,000/year workers will spend their way up to $70,000/year lifestyle within a few short months, and be in WORSE financial shape than they were in before. Then, they'll "need" to make more money, and complain when they don't get it. They won't be able to find work anywhere else at this rate (because they've been coddled for so long in their dead-end job that paid over double market rate), and so they won't be able to leave the company. BUT, they'll be pissed because they're not getting more money and raises like they "deserve", they'll create a horrific environment for those who actually manage to live on that "meager" $70,000/year, drag those guys down into the whining and complaining toilet, and you'll have a company full of pissed off people. AND, chances are, they'll probably complain to a union and get the company to be forced to retroactively pay them raises.

Of course there will be exceptions, but this will be the main group of what you see.

Now, CEO's and companies can afford to "float" a little bit when their yearly revenue gets cut by 40% in a bad year. These employees CERTAINLY will not. Try cutting someone's $70,000/year salary across the board when the guy used to make $65k/year before your little social(ist) experiment. See what he does. AND, try cutting the floor mopper's $70,000/year salary down to $50,000 for the year... see what happens then.

This man is crippling the people who are in dead-end jobs, by saying to the new 19 year old kid "Oh hey, I know you've only developed 5% of your capability, and you're probably high-level manager material, but why don't you just stay there answering the phones and not develop yourself".

AND, you're going to have the actual skilled people at that company who make say 65k now, looking around saying "why the hell am I busting my butt as a manager when I could just answer phones for 70k... screw it"

I look forward to watching this one tank, right out of the book.

I kept it a little cleaner and avoided the attestation that "my vehicles were only used for business purposes and I had another vehicle to use for personal". Instead, I just reimbursed myself at the maximum per mile rate. I live out in the sticks so mileage wasn't a problem. In some years, I reversed it as I had one vehicle that I really only used for business and company would pay for everything and I would write a check for a few bucks for some miles for personal use. Give it enough legitimacy and no one looks closely.

Funny how the IRS loves to audit you if they think you didn't pay enough... but I've never seen them come to someone that pays too much and offer to find ways to give them a rebate...

Thank you for making this point, K!

That sounds like a good incentive plan and I generally agree with you. The thing about those large multi-nationals though is they are not owned by "a" person. So the opportunity described as "if I had a large multinational" never comes up. I understand your point though. Most often these businesses are not run like businesses the way you and I, and the electric motor refurbishing business down the road, think of running a business. They are driven by stock movement on a quarterly basis if not shorter windows. There are exceptions of course.

Getting national news exposure at a time when you are shopping for a buyer isn't a bad strategy to take... He couldn't buy that much airtime for a million bucks... (he was featured on NBC Nightly News last night in a 5-7 minute segment).

Interesting no one commented that he made a million a year and had the workers using cheap / small laptops and working on what looked like temporary folding tables & chairs all day...

" I paid myself something like $40k and took the rest as distributions"
I did the exact same thing. My CPA assures me it's legal. I also use the business to pay for anything I can that is honestly business-related.

I was immediately wondering how his wife felt about Price's CEO price decision before I read that he is single.
At least his income should shoo fly gold diggers
I wish the dude the best of luck.

Amen. I worked at HP when Carly took over and immediately knew that was going to be a bad deal just based on how Lucent (Fiorina's previous CEO gig) tanked right after she left. And why? Because she sacrificed the future (R&D) in the name of the present (higher margin). And I largely fault the Board of Directors for even hiring her in the first place under such a perverse incentive plan. Under Fiorina, HP went from investing 10-12% GROSS revenues (mandated by Hewlett/Packard) in R&D to <2%. Perversely enough, she was also the one who changed HP's logo to "HP Invent". And what happened? HP's products began to suffer in the marketplace and their brand is no longer the hallmark of premier engineering, but merely of just another competing electronics manufacturer.

If I had a large multinational company like an HP or a Dell or an Apple and I needed a new CEO, I would structure the incentive plan such that the CEO took a stock salary the first five years and got deferred options (five-year vestment period) only after the first three. That means that they would have had to run the business well for _eight_ years before they could cash in on the larger payout. Why? Because it takes at least two years for the old CEO's policies to finally leech from the system. Product lifecycle in tech industry is 18-months to two years, meaning that it would only be after four years that you would start to see new products hitting shelves that were completely initiated under the new CEO. Give them a year in the market to judge profitability and there's your five years. Additionally, I want them focused on the long-term - not the cut-and-slash that makes them popular on Wall Street. I want a company that lasts for decades - not a quick blip.

Also, I wouldn't give them the power to hire or fire anyone for the first year. It's a management fad when the top echelons change out to bring along all your hangers-on and establish them as VP's, etc. right off the bat and all it does is create chaos and entice your best people to jump ship. Brain drain is incredibly detrimental to all companies.

It's the Twentieth Century Motor Company all over again, this time with Eric Starnes, not Gerald Starnes Jr., in charge. All that's missing is Ivy Starnes, the schoolmarm-ish handout judge.

He sounds almost like Eric Starnes. But if the weird tax laws make this sound financial judgment, that's different.

Commenting on your last point there, you are exactly right. This is a short term plan for this particular CEO at this particular time.

"and will make his employees incredibly loyal." No it won't. All it will do is play socialism within his company. All those who excelled will stop excelling and simply preform at the average since there is NO benefit to working hard.

They will all be loyal to the paycheck not the employer.

While he is taking a bit of a different twist, he is still "spreading the wealth" evenly regardless of the efforts put in by each contributor, thus making everyone the same. Watch how this implodes.

I know in my ciurcles in IT, about 90% of the REAL work is only done by about 10% of the people. when that 10% "shrugs" because they are not receiving the only recognition that really matters...a wage difference between them and the lazy, his company will start falling apart at the seams.

I know I am going to watch and monitor this so I can throw it in the face of every liberal who loves socialism. Watch the mainstream media ignore the story when his company faces bankruptcy and everyone is unemployed.

Having said that it is HIS company he can do with it what he wants.

If more CEOs were like him, perhaps we would not see the bulk of our merchandise being imported from other companies and so many other companies outsourcing. For sure, this gentleman has ensured the loyalty of his employees. Definitely, a two-way street!

I said the same thing... he only has to pay himself a 'reasonable salary' for the IRS. I did the same thing with my real estate company several years ago, I paid myself something like $40k and took the rest as distributions, company paid for my cars, anywhere I went on travel there was a 'meeting' involved. I very legally had a 4% effective tax rate on around $125k.

It's hilarious how these liberal clowns jump on this like he's the Messiah.

My other thought is that Gravity is basically a small-fry PayPal, he may be in talks to sell it... if that's the case, he doesn't give a hoot, he will cash out and the new owner will stop paying the receptionist and janitor $70k / year pretty quickly anyway.

I agree, but I'd love to see a miniseries on this for when the guy snaps because he's broke all the time. Of course he should be wise enough to plan it all out.

I think you conflate the James Taggarts of the world - which abound - with the Hank Reardons. Bill Gates - love him or hate him - is certainly worth more than $1 million/yr. I would argue the same for Larry Ellison (founder of Oracle), Richard Branson (Virgin), and a whole host of others - including many small business owners who invested their blood sweat and tears but don't make the public stage. Now there are also certainly those not worth the $70K/yr, and that list is very long indeed and includes the majority of our politicians. What you miss, however, is that each business has the right to decide how much their officers get paid. Value is somewhat objective but also has a large portion of subjectiveness. If you are a stockholder in a company and you think that certain officers aren't worth their pay, you can choose to vote against them. If you are a customer, you can protest by not purchasing goods or services AND letting company representatives know about it.

I, however, find nothing useful in moaning on about how much someone else gets paid. It's pointless. What should matter is what YOU are doing to demonstrate your value.

It's his business, and so it's his choice. Nothing else need be said.

Many CEOs are worth way more than 1 million dollars a year. But many are hardly worth 70k a year -they are mostly politicians who have no idea how to create wealth. Take Jeffrey Immelt or a Carly Fiorini for example. There's another large group who are just glorified accounting cost-cutters. Part of the problem is that we don't spend time on studying how to create real wealth. I am not talking about making profits. In fact, most of these high paid CEOS actively work against the main principles of wealth creation.

This is an interesting one.

1) Did the story mention his bonus and equity structure? It may have and I missed it.

2) This is somewhat like those stories you hear from time to time where the CEO takes a $1 annual salary. This is a relatively short term arrangement for him. It goes back to previous levels if the company does better in the next year or two and if the company doesn't do better ... I'm sure something else will change. He is clearly not saying that he has decided that he just needs, and that he is "just" worth $70k per year from this point forward. He basically doesn't need any salary in the short term because ...

3) He has few expenses. It sounds like his house is paid for. He doesn't need a new car in the short term. He has made a more healthy salary over the last n years so I'm sure he has plenty saved and his retirement is probably already secure at age 30. Good for him. Well done.

4) This point is of lesser significance, but he also mentions that the crowd he "hangs" with is wealthy. So again, he can afford to take a year or two with lower salary and still be part of this crowd. Various expenses will be handled by osmosis, in the short term.

5) He started this company when he was 19. It is his baby and I am not surprised that he will pour everything into it to make it successful. And again, good for him - that's what you want out of a CEO. But this fact weakens the premise of the story. Comparing this CEO and his salary structure to all CEOs in general may be a bit like comparing apples and oranges.

I do find the story fascinating, especially for the comments over there on the Yahoo story.

"more companies woke up to the reality of no human on earth (even Hillary or Barack) is worth more that 1 million"
I agree that interlocking directorates artificially inflate pay, but I can see a possible scenario where someone is worth 1 million. If a company's earnings are in the billions and the best manager can improve them by 0.1% over the next best candidate, it makes sense to pay the better manager hundreds of thousands more than the next candidate. In practice, the positions are probably influenced by board politics, as you say, but I wouldn't say it's impossible for someone to bring millions of dollars of value to a large org.

So no merit pay? Company will turn into slackers. Seen many times. Closet socialist. Many who read A.S. still support forcing employees to join a union. Dolts.

It works for Warren Buffet!

He take $100,000/year as salary. The rest is in Berkshire Hathaway shares.

It's the government's system; these guys just know how to game it. And I'm OK with that.

I am with you, SaltyDog. I don't think this is altruism; I think this is a business decision.

It's actually a pretty good financial strategy. With no deductions, his $1mm salary would cost him nearly $400,000 in taxes. If $930,000 annually can be plowed back into his business, his financial stake in the company would increase by 40% the first year. If the gesture has it's desired effect on his employees, his holdings would increase exponentially. When he monetizes his holding either through an IPO Or more likely just sells his business outright he can annuitize his payments over X years and presumably pay a 15% long term capital gains tax. Decidedly better than 39.6% income tax.
Good plan. I hope it works out for him.

Not enough for me, if more companies woke up to the reality of no human on earth (even Hillary or Barack) is worth more that 1 million, a lot of companies bottom lines would be better and return more value to shareholders. The problem is the Boards and CEOs for a unique club that votes itself in, and most boards do no due diligence, just rubber stamping the CEO,the pulling the ejection lever when they realize they hired a loon and try again. For 2 years the Board and senior staff at Intel were believed to have been trying to get Paul Ottelini to do several things (mobile, foundry work) and were told "No". he finally left, and Brian Krazanich took over and it was about face. he didn't do it without the Board following. The goober at Home Depot who cost the company 70 million or so in wasted money on the "golden parachute" is on the posterboy list for this idea.