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CURRENT ISSUE

Getting An $80 Million Salary to Not Work
April 18, 2014 | Rodney Johnson

Rodney Johnson | Friday, April 18, 2014 >>

I want to build an app for smartphones that will remind me my wife is always correct.

Preferably, this reminder will happen right before I do or say something that implies otherwise, saving me a ton of time spent in damage-control mode.

If I can make this happen, I’d imagine I could get really rich, really fast.

Or, this could simply be another app that sits on a shelf without being purchased — providing me no income, and costing me both time and money in development.

That’s the way it is supposed to be…

I’m supposed to be in line for the suffering or the success that comes with taking a risk.

I think most people can relate to this idea, which explains our differing reactions to the wealth of successful new tech titans, and the salary heaped on executives of existing-line companies.

The contrast was recently brought into sharp relief on the front page of the business section of The New York Times on March 20th.

An article discussed the potential $10 billion valuation of Airbnb, a website that institutionalizes couch surfing (crashing at a friend’s place).

OK, it’s a bit more sophisticated than that.

Airbnb allows people offering their spare bedroom, apartment, home, or even couch to list their accommodations online to those interested in renting, or “couch surfing.”

It’s basically a personalized hotel service with some safeguards, like membership and reviews of accommodations and renters.

The website gets a small cut when a transaction takes place. The people at Airbnb have worked hard and have risked their own fortunes and talent in pursuit of success.

While I might be a tiny bit jealous of their wealth, I applaud them in creating it.

Compare this to the other story on the same page… that of Time Warner Cable (TWC) CEO Robert Marcus. He’s been the CEO of TWC since the first of the year, after holding various positions in the company.

His annual compensation is roughly $10 million, including base salary and stock options, but that’s not the point of the story. It appears that in his short tenure as CEO, Mr. Marcus has negotiated the sale of the company.

Given that this is a change in ownership, Mr. Marcus will receive a golden parachute worth $80 million. Hmm. He gets a salary of almost nine figures to not work at the company anymore?

Brilliant!

This same theme is being repeated at other corporations, of course. A money manager recently calculated that Coca-Cola is planning to award $13 billion in stock to senior management over the next four years, while the new CEO of GM is in line to make $14 million per year.

It’s hard to see what executives at Coca-Cola are risking or what the new CEO of GM has done to warrant so much in annual salary. This is the sort of thing that makes people angry, driving the conversation about income inequality.

We all know why the Airbnb people are getting rich. We might be jealous, but they put themselves out there either to succeed or to fail.

But what about the CEOs of Coca-Cola, GM, Time Warner Cable, or a host of other old-line companies?

That’s hard to figure out.

It sure looks as if small groups of people — boards of directors — are awarding incredible compensation packages to people who travel in their same social or economic circles.

When asked about it, these boards come up with tired answers like: “Our compensation falls within the normal ranges observed at companies with similar revenue and business lines.”

As if the old “everybody does it” standard is reason enough to pay people tens of millions of dollars for taking little to no risk. With many large companies recording record profits while their typical employees are having trouble making ends meet, it’s easy to see how the seeds of discontent are sown.

This is why we’ve pointed out for years that the Economic Winter Season — where employment is slack, so companies can be less generous with salary — could ruin the already poor relations between the rich and everyone else.

People admire those who strike out on their own and make it big, but resent those who seem to be benefiting from the work of others.  

Now is a good time to consider starting a business, where you can potentially build the next Airbnb and stay away from the chains of corporations.

Maybe I’ll ask my wife for a good business idea… she’s always right.


Rodney

P.S. In Harry’s most recent book, The Demographic Cliff, he details the nine most important principles (risks and rewards) for how to start and maintain a thriving business in this Economic Winter Season. Click here to get ahead of the game.

P.P.S. I thought I’d share with you some recent news about Airbnb: Other than this site being utilized for “couch surfers,” apparently it’s also a hit for guests interested in “sexual escapades.” I guess “brothel” will soon be added to their list of accommodations.

 
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