Category Archives: compensation

$70,000: The New Minimum Wage

By now, you’ve likely heard of Gravity Payments’ CEO and Founder Dan Price, who set off the latest salvo in the wage wars when he told his 120-person staff that he would raise the salary of even the lowest-paid clerk over the next three years to a minimum of $70,000.

According to the New York Times‘ piece, Price, who started the Seattle credit-card-payment processing firm in 2004 at age 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 percent to 80 percent of the company’s anticipated $2.2 million in profit this year.

The paychecks of about 70 Gravity workers will grow, with 30 ultimately doubling their salaries, according to Ryan Pirkle, a company spokesman. The average salary is $48,000 a year.

While Price’s audacious move may not have many companies following in its path, it at least speaks to an economic issue that has captured national attention in the years since the recession: The disparity between the soaring pay of chief executives and that of their employees.

 Indeed, in an essay published recently by Politico Magazine, venture capitalist Nick Hanauer warned that the widening income gap in the United States would eventually spark a violent revolution:

“No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out.”

But, according to the Huffington Post,  rather than see this as a charitable offer to his workers, Price sees the pay raises as an investment. In theory, workers motivated by higher salaries will ultimately attract more business and handle clients better.

“This is a capitalist solution to a social problem,” Price said. “I think it pays for itself, I really do.”

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What’s On CFOs’ Minds These Days?

CFOHow are chief financial officers in North America feeling these days? They’re concerned, but fairly optimistic on matters such as hiring and their company’s growth prospects, according to Deloitte’s latest CFO Signals survey, for the year’s first quarter.

Gyrations within the global economy — particularly China and Europe, along with the strengthening dollar — have the 100 CFOs from North America’s largest companies concerned, yet most feel positive about their company’s prospects for growth this year. Forty eight percent expressed improving optimism while only 14 percent expressed declining optimism.

Domestic hiring expectations among the CFOs rose to 2.4 percent, up from the previous quarter’s 2.1 percent. CFOs in the energy/resources industries are the most optimistic at 4 percent, while manufacturing CFOs have the lowest optimism, at 0.5 percent. Meanwhile,  optimism on offshore hiring rose to 3.1 percent from the previous quarter’s 2 percent.

Shareholder activism is a big concern, with close to three-fourths of the CFOs saying they have experienced some form of shareholder activism. About half said their companies have made at least one major business decision specifically in response to such activism. As noted in this story, some investors are specifically targeting companies’ executive-pay practices — particularly when they feel pay and severance are way out of line with performance and with the median pay received by employees.

Finally, China appears to have definitely lost its luster: Only 18 percent of the CFOs describe China’s economy as good, compared to 34 percent in the last quarter. And only two percent describe Europe’s economy as good — and just 10 percent expect it to improve in the next year.

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CEOs Pay the Price for Scandal

CEO payWhether it’s a companywide pattern of unseemly actions or one rogue employee’s dirty deeds, corporate misconduct happens.

And, when it does, the chief executive has to answer for it.

Theoretically, anyway. But how do you hold CEOs accountable for ethical breaches—and deter future lapses—that occur on their watch?

One way is to hit them in the wallet, in the form of reduced salaries or forfeited bonuses, for example.

Earlier this week, the Wall Street Journal suggested that more boards are taking that route, in a piece highlighting a few prominent examples of CEOs who have recently seen their compensation cut in the wake of scandal (subscription required).

For instance:

  • The board of directors at GlaxoSmithKline cited the settlement of bribery charges in China (and the company’s sinking profits) when it slashed CEO Andrew Witty’s pay nearly in half.
  • Rolls-Royce Holdings chief executive John Rishton saw his salary cut last year amidst a series of bribery and corruption scandals that continue to plague the company.
  • Faced with sliding profits and a spate of compliance issues, soon-to-be former Standard Chartered CEO Peter Sands recently announced he would forego a bonus reportedly in the neighborhood of $6 million.

Richard Leblanc, an associate professor of governance, law and ethics at York University, told the Journal that affecting executives’ pay incentives is “the best way to control management” in terms of preventing bad behavior and unsavory business practices.

In the same piece, Leblanc says boards are taking an increasingly unforgiving stance on such transgressions, withholding CEO pay and vesting of equity as part of a broader trend of “risk-adjusted” compensation.

In some cases, chief executives may be forced to fall on their swords even if untoward behavior took place before he or she took over the top spot.

In fact, CEOs should be prepared to do just that, according to Alan Johnson, managing director of compensation consulting firm Johnson Associates.

“It may not be your fault,” Johnson told the Journal. But “the lesson for executives is to expect it.”

Johnson urges CEOs to “get out ahead of the board” and actually volunteer to have their pay cut or to waive a bonus in such a situation.

“It’s probably going to happen anyway,” he said, “so why go through the pain of [the board] having to agonize over it?”

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The Push for Gender Wage Equality

On the heels of Patricia Arquette’s call for wage equality at last Sunday’s Academy Awards ceremony, Arjuna Capital issued a press release yesterday referencing Arquette’s remarks and calling attention to eBay’s decision to oppose the wealth-management GettyImages_478267645firm’s gender-pay-transparency proposal.

Could proposals like this one be a preview of things to come? I would think many HR leaders probably hope they won’t be.

Here are some specifics from the Arjuna’s release …

“eBay’s Board has committed to publicly oppose a shareholder proposal filed by Arjuna Capital … requesting eBay publicly report the pay disparity between male and female employees and set goals to close the gap.

This is the first year the issue of gender wage equality has been put to the proxy ballot of a U.S. corporation and the Company’s opposition comes in the face of public outcry and regulatory efforts … .

The eBay Board has stated that it believes that implementation of this proposal is not in the best interests of eBay and its stockholders.”

Arjuna’s proposal calls for eBay to issue a report that would be “adequate for investors to assess eBay’s strategy and performance” and “would include the percentage pay gap between male and female employees, policies to improve performance and quantitative reduction targets.”

In case you’re not familiar with Arjuna (I certainly wasn’t), here’s a snippet from its website …

“Our mission is twofold: Through our research and activism, we seek to advance the understanding of what sustainability means for investor returns and corporate profitability.

We bring the fruits of those efforts to our clients in the form of the most diverse, sustainable, profitable and suitable investment opportunities on offer.

We work to build and preserve our clients’ wealth while serving the common good through enlightened engagement in the capital markets.”

In its response to Arjuna, eBay wrote …

“We remain committed to our ongoing efforts to promote diversity in the workplace and strongly believe we continue to make demonstrable progress in building a diverse eBay. As such, the Board feels that the proposal would not enhance the Company’s existing commitment to an inclusive culture or meaningfully further its goal and efforts in support of workplace diversity.”

Natasha Lamb, director of equity research and shareholder engagement for Arjuna Capital, said the eBay proposal is Arjuna’s first and only attempt to seek information on pay gaps. “But our goal,” she explained, “is to invest in companies committed to the innovation and success diversity fosters, and we intend to continue to seek more transparency on these issues.” (She said she’s heard similar proposals, independent of Arjuna, were sent to the boards of ExxonMobil and Wal-Mart for the current proxy season.)

Lamb said she was surprised by the board’s opposition, since the eBay proposal is clearly in the interest of enhancing shareholder value.

Of course, not everyone agrees that would be the case.

Yesterday afternoon, I spoke with Alan Johnson, managing director of Johnson Associates, a New York-based compensation-consulting firm, who told me he wasn’t at all surprised eBay’s board would reject the proposal.

“In terms of eBay,” Johnson said, “the assumption is being made that the jobs are the same, but the reality is that that may not be the case. eBay, for instance, may have a big call center staffed by females. If that’s true, it would skew all the numbers.”

Johnson noted that the Arjuna proposal is an attempt to put “a lot of pressure on fixing something that may not be correctable” and could ultimately “do a lot of harm” by encouraging employers like eBay to offshore jobs or hire part-time workers.

Apparently not one to mince words, Johnson described the effort as “naïve” and a “big, expensive distraction.”

Like I said, not everyone agrees the proposal is a good idea.

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Promotions on the Rise

If this isn’t a sure sign of an ascendant economy, then I’m not sure what one is: The percentage of employees receiving a promotion on an annual basis has increased from 7 percent to 9 percent since 2010.

This is according to a new survey titled “Promotional Guidelines” conducted by WorldatWork, a nonprofit human resources association and leading compensation authority based in Scottsdale, Ariz.

The association conducted the 2014 survey — its fourth such survey — of its membership to better understand the trends in promotional guidelines.

The survey focuses on a variety of practices and policies including what employers consider to be a promotion as well as the standard pay increases that often accompany promotions. WorldatWork conducted similar compensation practices surveys in 2012, 2010 and 2006.

“The steady upward trend of employee promotions mirroring the economic recovery is further evidence that organizations are relaxing their budget purse strings,” says Kerry Chou, WorldatWork senior practice leader. “While the gradual trend is good news, the data also suggests that employee vacancies are helping employers foot the bill for these promotions.”

Additional highlights from the 2014 survey include:

  • Less than half (42 percent) of responding organizations budget separately for promotional activity.
  • In order to define employee movement as a “promotion,” 77 percent of responding organizations require higher-level responsibilities and 75% require an increase in pay grade, band or level.
  • 63 percent of respondents said their organization does not feature or market promotional opportunities or activities as a key employee benefit when attempting to attract new employees.
  • More than 60 percent of workforces consider their organization’s promotional opportunities to have a positive effect on employee engagement and employee motivation.
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GM Takes Care of its Hourlies

blue collarGeneral Motors is still digging out from the onslaught of legal bills, settlements and recall costs of its faulty ignition-switch debacle that’s been directly linked to at least 51 deaths so far. Costs for the nation’s largest automaker stand at nearly $3 billion and counting.

That has not, however, stopped GM from awarding its unionized hourly workers record bonuses of up to $9,000 apiece based on the company’s performance last year. Excluding settlements and other costs linked to the recalls, GM’s North American division would have seen a whopping $9 billion in pretax earnings last year, reports the New York Times. Recall costs whittled that down to $6.6 billion. GM’s strong financial position was partly enabled, of course, by its $49 billion bailout by the federal government.

“I thought the recalls were going to kill us,” GM worker George McGregor, president of the United Automobile Workers local at GM’s Detroit-Hamtramck plant, told the Times. “We had the big check coming. We shouldn’t have to pay for their defects.”

GM’s unionized hourly workers are to be given annual bonuses based on the company’s financial performance, as per its current contract with the UAW. A spokesman told the Times that CEO Mary T. Barra decided that the workers had done their part to help the company meet its performance goals and should not be penalized because of the failures and mistakes made by others in leadership positions.

GM may also have had its eye on upcoming contract negotiations with the UAW this summer. “General Motors’ announcement today leaves no doubt about the strong, stable environment the G.M.-UAW collective-bargaining agreement created,” UAW President Dennis Williams said in a statement yesterday.

And what about GM’s salaried, white-collar workers? They, too, will get bonuses that will be unaffected by the automaker’s recall costs, two sources told Bloomberg News. Those bonuses are based on a blend of regional and global results, they said.

Barra and her top team will, however, see the recall costs eat into their own compensation, the sources said.

“The optics of not reflecting the recall costs into executive bonuses would be really bad,” Maryann Keller, an independent consultant, told Bloomberg. “In this case, the recall was precipitated by past management, but that’s just the way it is.”

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Another City Tackles Paid Sick Days

The Philadelphia City Council today is debating a hot-button topic with potential HR ramifications that may reach far beyond the city’s limits: whether to enact a paid sick days bill into law.

If passed, the City of Brotherly Love will join San Francisco, Washington, D.C., Seattle, Portland, Ore., New York City, Jersey City, Newark and the state of Connecticut as municipalities with such laws on the books.

While the debate around such laws has been growing over the years, momentum for its passage increased after President Obama’s recent State of the Union Address, which called for cities to ensure paid sick days for millions of Americans. The president is also urging Congress to require companies to give workers up to seven days of paid sick leave a year.

According to the National Partnership for Women & Families, San Francisco became the first locality in the nation to guarantee access to earned paid sick days in 2006.

In 2008, the District of Columbia and Milwaukee passed paid sick days standards that included paid “safe” days for victims of domestic violence, sexual assault and stalking. In 2011, the Connecticut legislature became the first in the nation to pass a statewide paid sick days law, and Seattle became the fourth city, with Portland, Ore., and New York City joining their ranks in 2013.

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Top Five Top Executive Career Mistakes

We all receive hordes of lists at the end of one year and the start of the next. Top 10 this of 2014. Top 5 that. So on first take, I was 185784831 -- executive interviewprone to ignore a release from JMJ Phillip Executive Search on the top five career mistakes executives made in 2014 when pursuing a career move.

Mind you, these “mistakes” aren’t even confined to HR executives. All the more reason to disregard.

But on second read, I decided to share it because every executive, HR or otherwise, could use pointers on what not to do to get where he or she wants to go. And these were put together by an executive search firm — “the top five mistakes our search consultants witnessed in 2014,” as its release states — so they’re not exactly being pulled from thin air.

The first no-no is to focus too heavily on a hypothetical bonus that may or may not come from your current, soon-to-be-previous, employer. As one “high-level executive” told Phillip’s researchers:

“You cannot keep looking backwards. Your future is in the hands of your new employer. So I lost some bonus money, not every step is forward and career growth certainly isn’t linear. If the job is worth taking, it’s worth taking whether you get your bonus from the old company or not.”

As Phillip’s release puts it, “one thing to think about before you sit down to talk compensation, if you’re flinging out wild numbers about a bonus that ‘may come,’ your chances of getting the job are going to go down.”

Second, the consultants found, was what they list as “relocation bi-polarism.” While executives “know the game [and] how to make a career change …,” they write, “we witnessed something in 2014 that was a bit disturbing. Companies often complained about candidates, be it from a firm or their own internally sourced, backing out in the 25th hour because of relocation.” They go on:

“If you don’t want to move, you need to figure that out early on in your career search, ideally before the first interview and absolutely no later than after the first interview. If you fly out somewhere three or four times only to back out, wasting people’s time may not go well for your reputation.”

Third is playing “hide the compensation.” In short, the release says, “nothing seems to stop an offer in its tracks faster than withholding what you are currently earning.” It continues:

“We know it’s a point of leverage and you don’t want them to lowball you, but we look at it from a different light. If the company see’s your value, [it’s] going to pay you what you are worth. Likewise if you are trying to get a 30 percent-to-40 percent raise by playing the hide the compensation game, the company can equally say you’re just looking for a pay day, not a career. Be honest with the company about your compensation, tell them where you would like to be AND WHY, then let the chips fall where they may.”

Fourth, be careful who you’re tempted to say you know in the company you’re interviewing with. Their opinion of you may not align with your perception and they might not even want you working there “because you have dirt on them,” the researchers write.

Lastly, they say, make sure your social-media profile aligns with your resume. As they put it,

“It seems everyone in their life took a position or two that didn’t work out. Maybe they only lasted three months because it was a bad cultural fit or the company wasn’t what they expected. So what do you do? You leave it off your resume but it’s listed on your LinkedIn profile or some other lead gathering site has your information listed and you cannot have it removed. So it only takes one simple Google search for someone to find that discrepancy and question your integrity.”

There you have it. Forgive me if I’m stating the obvious, but these weren’t exactly obvious to me.

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Bigger Raises on the Way?

465463337The numbers have been awfully similar, and awfully stagnant, for some time now.

Employees in the U.S.—those lucky enough to get a raise—have been receiving, on average, something in the neighborhood of a 3 percent bump in pay each year. And there have been no shortage of experts forecasting comparable increases in the months ahead.

Still, there’s reason to be optimistic that things will start looking up in 2015, according to New York Times senior economics correspondent Neil Irwin. In an online piece appearing this week, Irwin asks whether pay raises will become more commonplace this year, and sees at least three recent signs that may point to “yes.” Specifically:

  • The number of available jobs in the U.S. rose to 4.97 million in November—the highest that figure has been since 2001—as seen in the Labor Department’s latest monthly job openings report.
  • The recently-released National Federation of Independent Business Small Business Optimism Survey finds overall optimism among small businesses at its highest point since 2006, with the proportion of small businesses planning to increase compensation in the next three months 17 percent higher than those that planned decreases.
  • Hartford, Conn.-based health insurer Aetna has announced that, beginning in April, it would set a minimum hourly pay rate of $16 for its workers, which Irwin described as “the most interesting piece of evidence for rising wage pressure.” This increase equates to a roughly 11 percent jump in pay for 5,700 claims administrators and various low-level workers at Aetna.

The company is “counting on the raise to make it easier to retain good employees and recruit for vacant positions,” says Irwin, who posits that continuing job growth could find organizations that fail to raise wages “at a competitive disadvantage, losing their best workers to companies like Aetna that try to get ahead of the curve a bit with pre-emptive raises.”

Whether that scenario plays out remains to be seen, of course. Irwin acknowledges as much, allowing for the possibility of the job growth rate flattening as the U.S. inches closer to full employment, and/or the millions of people no longer in the workforce re-entering in large numbers and subsequently holding down wages.

Nevertheless, the aforementioned developments present “a coherent, consistent story,” says Irwin, with employers looking to fill more openings, small businesses expecting to raise pay and “one giant employer … doing exactly that.”

“Add it up,” he says, “and Aetna workers may not be the only ones seeing raises this year.”

Indeed. Aetna employees will certainly not be the only ones receiving raises in 2015. But it will be interesting to see if more large organizations follow Aetna’s lead and begin to break the 3-percent threshold that’s been the norm for so long.

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What Workers Want and How to Supply It

As most of you embark on your first official work day of 2015, and Bruce-Tulgan-New-Photo-June-2014-200x300just in case a New Year’s resolution was to treat your employees even better this year than last, I thought I’d start you off with some suggestions from workplace and demographic expert Bruce Tulgan.

As I noted in this earlier (summertime) blog post about his recent book, The 27 Challenges Managers Face, Tulgan, CEO and founder of New Haven, Conn.-based management consultancy RainmakerThinking Inc., is pretty authoritative when it comes to employer-employee relationships.

In this more recent post, What Employees Want and How to Give It to Them, Tulgan once again relies on his and Rainmaker’s more than 20 years of research into workplaces and manager-employee relationships to give you these “key elements of every job that employees typically care about,” he says.

As he puts it in the post:

“You want to be generous and flexible with your employees. Why wouldn’t you? Everybody is working harder. Everybody is under more pressure. Everybody needs more than what they are getting.

If you are the boss, one of the most important parts of your job is taking care of your people. Remember, people work to take care of themselves and their families. They want your help. Some managers consistently do more for their employees. If you’re not one of those managers, what is your problem?”

He’s not the only one stressing the importance of treating workers with respect and helping them develop — especially as more millennials and Gen Zers enter the workforce. But he’s one of the few with this much research behind what he recommends.

So here’s Tulgan’s list of what employees really care about:

  1. The ability to earn more money. This is all about the compensation package. What is the base pay and the value of the benefits? How much of the pay is fixed? How much is contingent on clear performance benchmarks tied directly to concrete actions the individual employee can control? What are the levers for driving the pay up or down?
  2. More control over their own schedules. What is the default schedule? How much flexibility is there? What are the levers for achieving more or less scheduling flexibility?
  3. Relationships at work. Who will the employee be working with? Which vendors, customers, co-workers, subordinates, and managers? What are the levers for controlling who the employee has a chance to work with (and/or avoid)?
  4. Task choice. Which regular tasks and responsibilities will the employee be assigned to do? How much of it is “grunt work” (tedious or otherwise difficult recurring tasks)? Are there any special projects? What are the levers for controlling the employee’s opportunities to work on more choice tasks, responsibilities or projects?
  5. Learning opportunities. What basic skills and knowledge will the employee be learning in order to handle his basic tasks and responsibilities? Will there be any special learning opportunities? What are the levers for controlling access to those special learning opportunities?
  6. Location and workspace. Where will the employee be located? How much control will the employee have over his workspace? Will there be much travel? Are there opportunities to be transferred to other locations? What are the levers for controlling these location issues? Within a given workspace, how much latitude will the employee have to customize his/her immediate surroundings?

Tulgan says the key to making these desires work for you has a whole lot to do with how you leverage them, as bargaining chips. He offers these examples:

  • “You don’t want to work on Thursday? I’m glad to know that. Here’s what I need from you by Wednesday at midnight.”

  • “You want your own office? Here’s what I need from you.”

  • “You want to bring your dog to work? Great. Here’s what I need from you.”

  • “You want to have lunch with the senior VP? Here’s what I need from you.”

“When managers are able to [leverage employee desires and business needs like this],” Tulgan says, “they are giving the employee control over [his or] her rewards by spelling out exactly what [he or] she needs to do to earn them.

“In exchange,” he says, “the employee will probably be willing to do a lot [more] — to work longer, harder, smarter, faster or better” — while getting a valuable and immediate reward in return.

Sure, you can say all this is intuitive, but I would counter with, “then why aren’t more employers doing it?”

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