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Are you paying yourself too much?

As we get into the holidays, I want to ask all of your startup CEOs this question. Could you be paying yourself too much, and risk losing your business eventually? No, this isn’t coming from my Scrooge side, but some practical thinking.

Last week, a Sili Valley startup (Yet Another Social Media Posting Tool) posted, in the name of complete transparency, their entire staff salary schedule, from the lowliest workers on up to the CEO, who is getting nearly $160k. While people weighed in on whether or not this is Yet Another GenY Oversharing, what got me going on this particular screed was what the CEO was paying himself. It should be about a third of his current draw.

CEOs should be working for peanuts. Yes, they have bills to pay, but if they are in the startup scene to make money, they should stick with a salaried position at a more established company. When you go into startup mode, you want to be building a company, and you do that with offering equity and a longer-term payouts. Offer more money, and chances are good that your venture will fail because you will be burning through your cash pile. I asked a friend of mine, a tech startup CEO, for his opinion, and he told me: “I personally don’t believe in the CEO of a startup having the highest cash salary. If CEOs believe the story that they are telling investors then should be taking as much as they can in stock. If they are concerned about the cash portion of their paycheck they should be seeking employment elsewhere.” Take a look a this poll taken last year of startup CEO salaries.

And lest you think this is just for startups, the CEOs of Facebook, Oracle, Google, Yelp and HP all had $1 salaries in the past year — granted, they all made megamillions on bonuses and other incentives, but still something to think about.

And while it is admirable that this one startup wants to be so transparent, they could be hurting themselves in the long run. Again from my friend the tech startup CEO: “I would never publicly disclose my company’s compensation model. Doing so provides your competition better insight into how you think and how to compete against you. It also gives potential employees a baseline by which to start negotiations” when they start thinking about going elsewhere.” He and I both think that experience is a poor metric to be used in setting higher salaries. What should matter is results, and what each staffer produces, or how the market will respond to having a rockstar on your team.

Happy holidays and hope you all have a great break and a wonderful new year’s.


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More Stories By David Strom

David Strom is an international authority on network and Internet technologies. He has written extensively on the topic for 20 years for a wide variety of print publications and websites, such as The New York Times, TechTarget.com, PC Week/eWeek, Internet.com, Network World, Infoworld, Computerworld, Small Business Computing, Communications Week, Windows Sources, c|net and news.com, Web Review, Tom's Hardware, EETimes, and many others.