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Balancing Act

How would you balance stockholder/employee interests?

  • $0 pay raise for employees 20% payout for shareholders

    Votes: 0 0.0%
  • Raise pay to $26,443 5% payout for shareholders

    Votes: 0 0.0%
  • Raise pay to $30,231 0% payout for shareholders

    Votes: 0 0.0%
  • Raise pay to $34,019 5% loss to shareholders

    Votes: 0 0.0%

  • Total voters
    6
  • Poll closed .

vasuderatorrent

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You have just been hired CEO of an established company. The company has been showing meager profits for the past 10 years ranging from -5% thru 5%. This year you are anticipating a 20% profit which equates to $100,000,000 due to an improvement in the economy.

Your company has 8,250 employees. The top 20% of your employees are very well paid. The bottom 80% are all making $15,080 per year and have been for the last 5 years. This year is different. The economy is better and these employees may leave for better opportunities. You also may have trouble hiring new employees if you set the wage too low. Your company by-laws states that you can only change wages once a year which is today.

How do you balance making the stockholders happy with generous profits and keeping the employees happy with generous wages?

Please wait for the poll.
 
The shareholders are doing fine, its the people we should be worrying about. With the economy doing better, the company needs to keep its most valued assets from leaving. The shareholders will stay as long as the company is doing well, the employees are indifferent to that fact. 2% shareholder payout is the way to go.
 
None of the above.

Use the extra profits you get for this year to introduce greater automation and cost savings for the future. Also keep some of it as a reserve. If the company is in a non-right to work state, then use the extra profit to move the companies headquarters and as much of the labor to a low tax/right to work state.
 
You have just been hired CEO of an established company. The company has been showing meager profits for the past 10 years ranging from -5% thru 5%. This year you are anticipating a 20% profit which equates to $100,000,000 due to an improvement in the economy.

Your company has 8,250 employees. The top 20% of your employees are very well paid. The bottom 80% are all making $15,080 per year and have been for the last 5 years. This year is different. The economy is better and these employees may leave for better opportunities. You also may have trouble hiring new employees if you set the wage too low. Your company by-laws states that you can only change wages once a year which is today.

How do you balance making the stockholders happy with generous profits and keeping the employees happy with generous wages?

Please wait for the poll.

If I am a typical CEO for a large company,I give myself an enormous bonus, give my top tier cronies a huge bonus, provide just enough incentive to my shareholders to keep them happy, give middle management a free coupon for a dinner at Applebees,and tell the rank and file employess that they will just have to tighten their belts,take that small reduction in pay with no bennies and be thankful they have a job.
 
None of the above.

Use the extra profits you get for this year to introduce greater automation and cost savings for the future. Also keep some of it as a reserve. If the company is in a non-right to work state, then use the extra profit to move the companies headquarters and as much of the labor to a low tax/right to work state.

This sounds similar to the first option. What is difference between what you said and Option 1?
 
Last edited:
2% shareholder payout is the way to go.

Is that legal? The shareholders could have invested in a different company if they knew they would only earn 2%. I feel that you are shirking your responsibilities. You are only making the decision for the year ahead. After that year, you can be fired. The new CEO may fire all of the employees. In my opinion you are not looking out for the shareholders or the employees. You are required to protect them both.
 
You have just been hired CEO of an established company. The company has been showing meager profits for the past 10 years ranging from -5% thru 5%. This year you are anticipating a 20% profit which equates to $100,000,000 due to an improvement in the economy.

Your company has 8,250 employees. The top 20% of your employees are very well paid. The bottom 80% are all making $15,080 per year and have been for the last 5 years. This year is different. The economy is better and these employees may leave for better opportunities. You also may have trouble hiring new employees if you set the wage too low. Your company by-laws states that you can only change wages once a year which is today.

How do you balance making the stockholders happy with generous profits and keeping the employees happy with generous wages?

Please wait for the poll.

The way I figure it at a 10% share holder payout, the employees also receive 10% increase for the last five years that there were no increases. That is a bit disproportionate in the favor of workers as the shareholders haven't been making returns however the capital increase of their share value has probably risen substantially and a 10 percent return is an acceptable return on investment. Also the retention of an experienced workforce is worth higher future returns if business continues to grow. Bottom line... treat workers fair (not excessive) and the returns will be there in season.
 
None of the options offered is "best". What you have described is an (expected) extreme spike in sales volume which may (or may not) last for a while but does not indicate any sort of trend.

Based on expectations do nothing, but if it actually occurred then: Pay the shareholders a normal high yield (as you did in 5% profit years) and give the employees a one time bonus (profit sharing) of the same percentage as the sharehollders got (5% of gross pay?). Bank the additional proceeds for possible future expansion if the trend continues.
 
I've saving the money for the upcoming Obama Care fine because if I have 8,250 employees and the bottom 80% are only making $15,080/year I can guarantee you the company can not afford the mandated health insurance coverage.
 
This sounds similar to the first option. What is difference between what you said and Option 1?

There is no payout to share holders and, not only is there no "bonus" or payout to workers, it uses the money instead to replace low end/low skill workers with automation. This should help offset the cost of Obama-care and possible raises in minimum wages.

What your example shows, is not an increase in profit margin due to better economy, but rather a "windfall" profit. Fortune 500 2009: Top Performers - Most Profitable Industries: Return on Revenues
If you check the link, then the "companies are making huge profit margins" mantra doesn't play out in reality. Companies like Wal-mart, which has been at the top of Fortune 500 for awhile for near record profits is still under 4% for profit margin and around $3 per share for stock holders.

So any CEO that sees a one year jump from around 5% to 20% for profit margin will know that it is not "due to the economy" and is a "windfall" and will use that "windfall" to stabilize future margins at a positive but much lower normal margin.
 
If I am a typical CEO for a large company,I give myself an enormous bonus, give my top tier cronies a huge bonus, provide just enough incentive to my shareholders to keep them happy, give middle management a free coupon for a dinner at Applebees,and tell the rank and file employess that they will just have to tighten their belts,take that small reduction in pay with no bennies and be thankful they have a job.

Thats a better option than wasting on some lazy dumbass that let themselves remain at the bottom of the pay scale with little to no true value and easily replaced.

They should be thankful they have a job, especially if it is one at or near minimum wage. If they don't like it, well, since they have no valuable skills and never got themselves education and training to be valuable, there are thousands of others just like them available to take their place.
 
Thats a better option than wasting on some lazy dumbass
The OP doesn't say that.

DVSentinel said:
with little to no true value and easily replaced.
The OP doesn't say that either.

DVSentinel said:
They should be thankful they have a job, especially if it is one at or near minimum wage.
They could be thankful. They may not be thankful. That really doesn't matter at all. Will they will be finding another job during the improved economic situation? If so, will you be able to hire new workers to replace them. Wages can only be changed once a year.

DVSentinel said:
If they don't like it, well, since they have no valuable skills and never got themselves education and training to be valuable, there are thousands of others just like them available to take their place.
This is the only thing that you said that has anything to do with the OP. If this is true, you will turn out just fine with the 1st option. If you are wrong there could be some serious hiccups throughout the upcoming year. As CEO you have to gamble sometimes. You are the CEO. It's your decision.
 
The OP doesn't say that.


The OP doesn't say that either.


They could be thankful. They may not be thankful. That really doesn't matter at all. Will they will be finding another job during the improved economic situation? If so, will you be able to hire new workers to replace them. Wages can only be changed once a year.


This is the only thing that you said that has anything to do with the OP. If this is true, you will turn out just fine with the 1st option. If you are wrong there could be some serious hiccups throughout the upcoming year. As CEO you have to gamble sometimes. You are the CEO. It's your decision.

"The bottom 80% are all making $15,080 per year and have been for the last 5 years."

That kind a wage is either entry level and subject to change as they get experience or it is minimum wage unskilled labor.

If it is entry level, then the salary and benefits that they will receive once they advance are more likely to determine if they stay or not. If they move, then they are probably going to start their clocks over and be stuck at that level longer. If their skills are still drawing that kind of salary at 5 years, then they are most likely to lazy incompetents that the company would be glad to loose.

If they are minimum wage laborers, then they are unskilled/low skilled easily labor which means what I said not only applies but is frankly truthful.
 
"The bottom 80% are all making $15,080 per year and have been for the last 5 years."

That kind a wage is either entry level and subject to change as they get experience or it is minimum wage unskilled labor.

If it is entry level, then the salary and benefits that they will receive once they advance are more likely to determine if they stay or not. If they move, then they are probably going to start their clocks over and be stuck at that level longer. If their skills are still drawing that kind of salary at 5 years, then they are most likely to lazy incompetents that the company would be glad to loose.

If they are minimum wage laborers, then they are unskilled/low skilled easily labor which means what I said not only applies but is frankly truthful.

You completely ignored the point of this exercised and used it as an opportunity to criticize people that you hate.

The point of this OP would have been exactly the same if the employees were making $22,000 or $50,000 or $100,000. $15,080 was just an example. The question is how do you balance shareholder interests with employee interest.

The point wasn't to prove how much that you hate people. That was never my intention.

Btw: Your stereotypes are not accurate for a post 2008 economy.
 
You completely ignored the point of this exercised and used it as an opportunity to criticize people that you hate.

The point of this OP would have been exactly the same if the employees were making $22,000 or $50,000 or $100,000. $15,080 was just an example. The question is how do you balance shareholder interests with employee interest.

The point wasn't to prove how much that you hate people. That was never my intention.

Btw: Your stereotypes are not accurate for a post 2008 economy.

No, I used reality instead of unrealistic examples.

BTW, because I call the lazy and sometimes stupid does not indicate, in my case, hatred. It just an assessment of their abilities, motivations and why they are where they are.

How are they not accurate? No matter someones previous vocation, they can always research what professions are hiring and retrain themselves to get hired. If they choose not to, then they are lazy, just like the unskilled/uneducated crowd who does not take the opportunities available. Sometimes age will play a factor, outside of that, laziness and stupidity are the only excuses that are accurate.
 
You have just been hired CEO of an established company. The company has been showing meager profits for the past 10 years ranging from -5% thru 5%. This year you are anticipating a 20% profit which equates to $100,000,000 due to an improvement in the economy.

Your company has 8,250 employees. The top 20% of your employees are very well paid. The bottom 80% are all making $15,080 per year and have been for the last 5 years. This year is different. The economy is better and these employees may leave for better opportunities. You also may have trouble hiring new employees if you set the wage too low. Your company by-laws states that you can only change wages once a year which is today.

How do you balance making the stockholders happy with generous profits and keeping the employees happy with generous wages?

Please wait for the poll.

Why did our profit jump to 20% this year? Was it increase in efficiency? Did the workers do an especially good job? Did the market change? What I would do with it would depend on why it happened. I probably wouldn't raise employee salaries long-term, because I don't know if it was a one-time fluke, or if it will continue to happen. if the employees shared some of the responsibility for the changes that led to our improved performance, I'd make sure they got some of it as a one-time bonus.
 
Adjust shareholder % if necessary to ensure a yearly cost of living increase for employees.

All other employee raises should be merit-based.
 
I've saving the money for the upcoming Obama Care fine because if I have 8,250 employees and the bottom 80% are only making $15,080/year I can guarantee you the company can not afford the mandated health insurance coverage.

Obamacare cost were already factoring in to this equation unless you are talking about the next year. If so, good way to stay ahead of the game. :thumbs:
 
The shareholders are doing fine, its the people we should be worrying about. With the economy doing better, the company needs to keep its most valued assets from leaving. The shareholders will stay as long as the company is doing well, the employees are indifferent to that fact. 2% shareholder payout is the way to go.

Stockholders are vested, "people" are not working there by force. You always have to be able to call the bluff of an employee or group of employees and give them directions to the front door if they have issue with working there.
Sounds harsh, but the OPs scenario brought up a business that is having one good year after many mediocre years.
 
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