Owner of a Credit Card Processor Is Setting a New Minimum Wage: $70,000 a Year
I commend the spirit of what this CEO is trying to do, but if I am an investor, director, or just even regular employee I would have serious reservations about this business strategy.> pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.I don't know what the financials for Gravity look like, but this really only makes sense from a financial standpoint if (1) the company can't re-invest the profits with a better ROI (rate of return) and (2) they aren't worried about competition - i.e. have a serious business moat. In addition, the company will have a higher payroll tax burden because of the higher salaries. (1) is somewhat justifiable as investing in your employees may garner loyalty/harder work which may raise the top-line, but (2) seems unlikely. There are a lot of credit card processing companies.What happens if profits aren't as good next year? Are they going to slash wages to previous levels (or lower)? Or, if he's intent on sticking to the $70k minimum wage, this means he'll have to let go more people if the time comes. Did they look at alternatives - issuing more equity, special dividend, more generous bonuses??I wonder how the conversation with finance went on this one.