Here’s one of the distinguishing characteristics of the economic downturn (aka the Big, Bad Recession) that we’ve been slogging through this year: A lot of people are getting paid less than they were before.
Lots and lots of Americans are dealing with this, even those who have historically made a lot of money—such as performers and professional athletes. It’s hard to feel sorry for them because, in most cases, whatever salary they are getting still ends up with “millions” on the end.
Yes, it’s hard to feel sorry for well-paid people who are still pretty well-paid, and that’s why it’s hard out here in Southern California to feel a lot of sympathy for professional basketball star Lamar Odom of the NBA champion Los Angeles Lakers.
Odom was one of the main cogs in the Lakers’ championship run this season, but he is a victim of unfortunate timing because he is also a free agent and is having to negotiate a new deal in the midst of a terrible economy that has hammered the pay of everyone—including star athletes who just helped their team win a championship.
According to ESPN.com, “Odom acknowledges he’s in the middle of a balancing act. There’s an argument for trying to get the most money possible. ‘You take a business man, anyone with a business mind, and they want the most money possible,’ he says. He points out that he’s 29 and needs to secure his ‘legacy as a basketball player, and a business man.’ ”
The word is that Odom and his agent are not budging from the $10 million-a-year figure, but the stalemate is wearing thin on the Lakers. The Times speculates that “Lakers owner Jerry Buss, who improved on his offer of $8 million a season to Odom, is getting frustrated [by the lengthy negotiations] and is thinking about pulling the deal off the table soon.”
Part of the problem is that the Lakers are over the NBA salary cap and have to pay a dollar-for-dollar penalty for every additional dollar they pay out to players next season.
So, paying Odom $10 million costs the Lakers a cool $20 million in the final accounting.
It’s hard to feel sorry for a guy who just was paid $65 million for five years’ work quibbling about making $9 million instead of $10 million. It’s also hard to feel sorry for a guy who is in a great job situation—the Lakers are a championship-caliber team with or without Odom—who seems willing to throw that away because he isn’t willing to take 10 percent less than he believes he should get paid.
But, that’s what makes this recession so difficult. Most everyone—from the guy getting paid a modest hourly wage to a high-salaried professional athlete—are being asked to suck it up and take less.
And as my blogging colleague Ann Bares of Compensation Force points out, “As was true with its predecessors, the consequences of this recession and the actions it has prompted by employers will be with us long into the future … and in ways we may not appreciate for some time to come.”
That’s the case no matter who you are—even if your name is Lamar Odom.
I mentioned this briefly in my latest Last Word column from here in New Orleans, but really, SHRM hit the right mark with its speaker lineup at this year’s annual conference. SHRM was both good AND lucky.
This isn’t a slam on Brokaw, but rather, an acknowledgment that the Society for Human Resource Management’s big-money opening-session speakers have traditionally been long on star power but short on business acumen, or advice specific to human resource professionals. I’ve said this before but it bears repeating: As much as I believe that Brokaw would have had some interesting things to say, his keynote would probably have followed the pattern set by Queen Noor, Bill Cosby, Lance Armstrong, Colin Powell and Sidney Poitier. They were interesting in the broad sense, but completely and totally divorced from anything specific that HR faces.
Jack Welch changed all of that, of course, and I would be shocked if he doesn’t set the standard for all SHRM Sunday speakers for years to come. A pox on SHRM’s house if the people who program this mega-event don’t hear the message from their membership on this, loud and clear. Once they’ve seen and heard the bark of Neutron Jack, they won’t willingly go back to the sweet stylings of Queen Noor.
As I also noted recently, the other top-line speakers were equally impressive. I didn’t hear Earl Graves Sr., the founder and publisher of Black Enterprise magazine, on Monday, but that’s only because I’ve had 30 years of hearing publishers jabber in my ear. I couldn’t voluntarily submit to listening to yet another one, although I heard that Graves spent a lot of time talking about the legacy of HR in the civil rights struggle. I’ll bet it was pretty interesting.
Tuesday’s speaker was Harvard Business School professor John Kotter, and although I have heard him many times before, I forgot some of the good stuff—like his account of entrepreneur Mary Kay Ash winning over somewhat snooty Harvard MBA students with her business smarts and ability to read an audience.
Like Welch, Kotter was pragmatic, although a little broader in his material. Still, hearing about leadership and change from a guy who has written 17 books on the subject (when does he find time to teach?) is something HR people really need.
I’m going to miss Wednesday speaker Lee Woodruff (author of best-seller In an Instant); I’ll be back at Workforce Management world headquarters in California. But the choice of Woodruff reinforces my point that this has been one of the strongest overall SHRM speaker lineups in years. And with Tuesday night’s musical guest, Sheryl Crow, the best musical choice in quite some time too. (Sorry, Hall & Oates.)
So here’s the big question: Will SHRM’s brain trust figure out that they made some good choices this year, but also lucked out with Jack Welch? Will they heed what everyone is saying here in New Orleans and tailor the Sunday speaker to the audience, or will they revert back to the old ways next year in San Diego?
When did stealing employees from your competitors—a longstanding and honorable tradition about as old as business itself—become a bad thing?
I used to work in the newspaper business way back when a) the newspaper business was still healthy; and, b) there were still cities in this country that actually had honest-to-God competition between daily newspapers. I know that makes me a dinosaur, but I can remember a time when the best part of my job was figuring out how to poach some up-and-coming star away from the other paper in town.
That’s why I am surprised at what’s going on in California’s Silicon Valley, where “the U.S. Justice Department is investigating whether Google, Yahoo, Apple, Genentech and other tech companies conspired to keep others from stealing their top talent,” according to a story in the San Jose Mercury News.
According to the newspaper, “few details have been disclosed so far about the hiring-practice probe, which The Washington Post first reported in a story on its Web site late Tuesday. Citing two unnamed sources, [the Post] said the Justice Department was examining the possibility that the four companies and other unnamed firms may have violated antitrust laws by ‘negotiating the recruiting and hiring of one another’s employees.’ ”
My surprise at this story flows out of my experience working at a San Francisco dot-com during the boom years from 1998 to 2001. Back then, poaching talent from a competitor (and we viewed just about ALL companies battling for technology workers as such) was a mark of both a strong company brand as well as a crackerjack recruiting operation. Luring talent away from someone else was as common as fighting traffic on the Bay Bridge—and, a helluva lot more fun.
So, having some sort of agreement among tech firms to not recruit talent away from one another, if true, would be a huge change in how Silicon Valley tech companies traditionally operate. Plus, it flies in the face of California’s “tough rules barring companies from restricting their employees’ job hunting,” the Mercury News noted.
“Many companies across the country require employees to sign so-called noncompete agreements, in which the worker agrees not to be hired by a competitor within a certain period of time,” the newspaper said. “But California law generally regards such pacts as unenforceable, said Bob Taylor, a Palo Alto attorney who specializes in antitrust law. … As a result, Taylor said, California ‘is one of, if not the most, difficult states for employers to prevent employees from taking jobs with competitors.’ ”
Maybe I just see things differently out here on the Left Coast, but a deal among big tech companies to pull their punches and not recruit talent from one another is akin to thieves agreeing not to steal from each other. What’s the point? And, can you really trust anyone to hold up their end of such an unholy agreement?
I follow the philosophy that all’s fair in business, love and war. Isn’t this what the whole notion of “passive” recruiting—an oxymoron if there ever was one—is all about? I’d love to hear what recruiters have to say about this, because if deals like this to not hire from competitors make sense, we might as well kiss the whole notion of recruiting goodbye.
There are certain issues that are universal to the workplace, any workplace, no matter where you work or what you do. And one of the biggest and most difficult workplace issues is one you may be dealing with right now: taking care of the office refrigerator.
I’ve had managers, executives and HR professionals at virtually every office I’ve ever worked in, big or small, struggle to deal with how to keep this communal experience clean, safe and accessible for all. Problem is, the old adage that Mom used to drill into your head—clean up after yourself—somehow seems to be forgotten by workers in the day-to-day flow of workplace life.
Bottom line is, everyone likes to use the office refrigerator but no one wants to take responsibility for what gets left in it. And anyone who actually takes some initiative and tries to proactively deal with the issue usually finds that the old adage that “no good deed goes unpunished” is absolutely spot-on when it comes to the office fridge.
So, add this to your list of office refrigerator horror stories. When a worker at an AT&T call center in San Jose, California decided to clean the communal fridge, it led to 325 AT&T employees getting evacuated “to a parking lot that was the company’s designated evacuation site, [while] 50 firefighters and 18 emergency vehicles raced to the scene. Seven employees, who were vomiting or complaining of nausea, were treated at area hospitals,” according to a story in the San Jose Mercury News.
According to the newspaper, “the aroma of rotting food” coming from the offending refrigerator at the AT&T office was hard for others to stomach. But when an employee decided to remove the mess to a conference room and scour the fridge with a cleaning fluid similar to 409 or Lysol, that’s when the real problem began.
“The woman on fridge duty had previously undergone nasal surgery for allergies,” the newspaper said, so she didn’t smell a thing. Others in her office did, however, and another employee sprayed a different chemical cleaner into the air, assuming it would temper the scent.
“And that’s when the party started,” said Fire Capt. Barry Stallard.
It led to the San Jose Fire Department’s hazmat team being called in, the office evacuation, and 28 people “with functioning noses [who] had to be checked out by paramedics after they were overcome by fumes.”
So, is there a lesson to be learned from this office nightmare? There is, of course: Everyone in the workforce needs to take responsibility for what they leave in the office fridge, and everyone needs to deal with their mess before it turns toxic. And if someone decides to take on the unpleasant chore of cleaning out the refrigerator, pat them on the back for their teamwork and diligence.
But whatever you do, also make sure they have a properly functioning nose.
If there’s anything good you can say about the terrible economic downturn we’re in, it’s this: Tough times force people to make tough decisions that they might not otherwise make. And that’s why I’m happy to find so many corporate boards that are finally showing some backbone and killing one of the most insidious and pernicious executive perks of all—the executive “gross-up.”
I can’t think of a single executive benefit that more clearly delineates the huge gap that exists between top executives and their employees. In my mind, it’s an egregious benefit that gives full meaning to the phrase “the rich get richer,” and I say that as someone who once received a gross-up and felt guilty about it.
Here’s the gist of what I’m talking about, courtesy of The Wall Street Journal: “As the recession fuels outrage over executive-pay excesses, 43 companies in Standard & Poor’s 500-stock index will stop paying certain taxes for their top brass this year, according to a review of 2009 regulatory filings for The Wall Street Journal by compensation-research firm Equilar Inc. The change comes amid increased investor criticism of the ‘gross-up’ payments, which cover the tax bite for a variety of perks, including club memberships and personal use of corporate jets, as well as golden parachutes following takeovers.”
Yes, let me make this perfectly clear: It’s not enough for top executives to get country club memberships and personal use of the corporate jet as part of their compensation package. In addition to those goodies, the company agrees to add to the executive’s pay in order to cover the additional taxes that might be payable on such a perk.
This is one of those hard-to-believe benefits, and I was stunned the first time it happened to me. It was back in the early 1990s when I went to work for newspaper giant Gannett as editor of the company’s statewide newspaper in Great Falls, Montana. The company paid for my move from Southern California, and one day, the HR director came by and handed me a check for something like $3,000 to cover taxes I might have to pay as a result of my relocation.
I was flabbergasted, and asked him what I had done to get this. He said it was just corporate policy for all executives. It happened to me again a few years later when Gannett transferred me from Montana to Hawaii as executive editor of The Honolulu Advertiser. The gross-up on that move was more in the $5,000 range, as I recall, but both times I was left wondering why the people making the most money should have their taxes covered on some really great benefit. It just didn’t make sense then, and it still doesn’t.
So, why does it continue? According to the Journal, “Companies say gross-up payments are sometimes necessary to recruit executives … but activist investors contend that tax reimbursements represent another example of treating the top brass like royalty. ‘There’s no pay-for-performance connection at all,’ says Richard Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees union. ‘All Americans are subject to taxes except executives who have found a way to avoid them.’ ”
The silver lining in this story is that many corporate governance experts believe that elimination of the executive gross-up will spread. Many boards, according to the Journal, view the present economic environment as a “once-in-a-lifetime opportunity to remove abusive compensation practices, says Patrick McGurn, special counsel for proxy adviser RiskMetrics Group Inc., which recently added gross-ups to its list of poor executive-pay practices.”
Executives need to be paid fairly, but the system has gotten way out of whack when the top person in a company gets paid 300 or 400 times more than the average floor worker the organization. I don’t think any reasonable person thinks that makes sense, and the gross-up is just more of the same. It’s a benefit for someone who doesn’t need more benefits, and who can damn well pay taxes on the ones they already get.
If McGurn is right, and boards are indeed whacking away at lousy executive pay practices, we can only hope that the gross-up is one of those pernicious perks that end up, finally, on the cutting room floor.
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