Friday, December 07, 2012

Giving 'til it theoretically hurts

“Good morning, and thanks for coming in today.”

My pleasure.

“Please, have a seat…
…the reason I called you in today is that we are reviewing our financial position, and we are realigning costs with a change in our business model.”

Which has been quite successful, if I might say.  Revenue is up, stock prices up, market cap is solid.  Looks like we’re doing very well.

“True…nevertheless, changing times mean changes in the workplace.  We are prepared to offer you a compensation package that is summarized by what you see on this fact sheet.  Please take a look at it.”

…but… if I understand the numbers here, I’d be taking a 24 percent pay cut, and that would be subject to another reduction after not more than five years.  That’s new.

“Like I said…changing time means changing…”

Yeah, I heard you.  Why is it that I’m having to take such a pay cut when business seems to be doing so well?

“Well, we think we are paying you too much, and besides, the improvements – the new health club, the day care center, the renovated offices – all cost money.”

I’m not sure I can agree to this offer.

“Well, perhaps we can sweeten it a skosh…”

I’m listening.

“Let’s say… a 19 percent cut instead of a 24 percent cut.”

While the company is earning more revenue in a bad economy and seeing its value increase year to year?  I might be agreeable to a five or six percent cut for the good of the franchise, but 19 percent?

“OK, how about this… a 14 percent cut.  And, you agree to a five-year package…”

After which you can cut me again.

“Changing times…”

Call for changes in the workplace, yeah, I get it.

“And we’d ask for a non-competition clause in your deal.  If you leave the firm, you can’t be employed by a competitor for at least three years.”

What?  Where does this come from?

“We’re going to have to hold firm on that.”

Let’s go back to the 14 percent cut.  You’re going to phase that in, right?

“Oh, no.  That goes into effect immediately.”

This isn’t going to work.  I’m still under the deal we made two years ago; how are you going to make good on your end of the bargain?

-- shrugs shoulders –

So, if I understand you, I have to take a 14 percent pay cut, today, and it’s only good for the next five years.  And, if I should leave the firm, I can’t take a job with a competitor for three years.

“We could perhaps bump  that period covering the deal from five to seven years, since you are part of the team, and maybe...maybe phase the pay cut over two years, half now and half next year.”

I still don’t think it’s such a good deal.

“How can you say that?  We’ve given up so much from our side of the table.  We bumped up our offer on compensation by nine percent.  We added two years to your deal.  Phased in the pay cut.  We’ve made real concessions here.”

That’s a change in your original offer.  You are getting real dollars out of my real pocket.  And my compensation package is still tied to your revenue model.  Meanwhile, you have all those stock options, and if you can show you cut labor cost – again, I might add, since you did this seven years ago, too – they will be worth a whole lot more money, none of which I’ll ever see.


When one side of the table talks about having given up so much, ask yourself, “given up based on what, what they have or what they want?”

You can only give up what you really have, not something based on a theory.

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