Is Generosity a Smart Business Strategy?
While the gap between outsized CEO pay and that of average workers has been the topic of many headlines lately, at least some CEOs are going against the grain and lowering their compensation – expressly to increase that of their team.
LinkedIn CEO Jeff Weiner recently made headlines of his own when he announced that he would give $14 million of his own stock bonus to the company’s 9,200 employees. On the heels of the social network’s report of slowed earnings – resulting in a 43% stock drop in just one day – some have hypothesized that Weiner’s move to improve employee morale in a highly competitive tech market is driven by business interests, rather than generosity. But he is not alone. Twitter and Aeropostale CEOs also gave their stock bonuses to employees after reports of organizational turmoil. And Gravity Payments CEO, Dan Price, incited a media storm when he announced that he was increasing the minimum wage at the company to $70,000 — while reducing his salary to be closer to his employees.
Whether you believe the actions of these corporate leaders are altruistic or an employee retention strategy, is it possible that they are a sign of changing times? Increasingly, leaders in the corporate sector are publicly recognizing that the level of their personal compensation isn’t always warranted, especially when the value isn’t shared by the companies’ employees or reflected in the bottom line. The media and American public may be rewarding them for it, as well. Following on Gravity Payments’ announcement, Price received a $500,000 book deal. At the same time, the company had 500 million social media interactions and a massive influx of resumes from people who wanted to work for a just company. (A company’s health and its motivations are likely big factors in how the public responds.)
Given that the majority ofAmericans say they don’t trust corporate America, it may come as no surprise that big announcements of just behavior can also come with greater scrutiny. Since Dan Price raised the company’s new minimum wage, people have been watching its financials more closely than ever. When Geekwire reported that Gravity Payments’ financials didn’t jive fully with what Price had communicated to the public, the company was quick to post a statement on its Facebook page defending the CEO’s compensation (closer to $1 million) as largely composed of shares of company stock, rather than an annual salary.
This growing conversation on fair employee pay and treatment – central to how Americans define a just company – is unfolding in the wake of a landmark mandate requiring companies to report publicly on pay ratios, between the CEO and median employee. How companies report this information, and whether it will ultimately present a clear picture of what CEOs earn in comparison to their staff, remains to be seen. But taken collectively, these events may be a sign that our barometer for corporate justness is evolving. If this is in fact true, first-mover companies that embrace transparency and begin dialogue early with the media and the American public will be better positioned for success, in a world that is increasingly demanding – and rewarding – justness.