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Freezing Executive Salaries to Pay Entry-Level Workers a Better Wage

posted by Jason Kottke   May 16, 2019

John Driscoll is the CEO of a healthcare company called CareCentrix. In an opinion piece in The Guardian, he wrote about the success of a plan his company implemented where they froze the salaries of the top 20 executives and gave significant raises to entry-level workers, from the federal minimum wage of $7.25/hr to $15/hr. Driscoll explains why the company decided to do this:

Assuming nothing went wrong, and assuming that our employees were living with another wage earner or working another part-time job, $7.25 hourly wage might be sufficient.

The reality is that for many of us, things do go wrong, and I had emails from my new teammates to prove it.

One was from a customer service representative — a young mother with a family, who had lost her apartment in a fire and did not have enough money for diapers. Another email soon followed — this employee had missed a few bills and was living out of her car with her child.

This drove me crazy: how did we get to the point where one of our employees had to apologetically ask for financial support so she and her family could put a roof over their heads?

While some of our elected officials congratulated us for creating jobs, I felt that we were failing some of our employees, and the communities we were based in. The more our executive team parsed through the requests for assistance, the more we all became uncomfortable with the mismatch between what we asked of our employees and what we provided to them in turn.

And the real kick in the groin about the plan? It wasn’t even that tough to implement!

I challenged the chief financial officer to see how deeply we would have to freeze wages in order to reach our goal of a base rate of $15 per hour.

The answer was that we did not have to go very deep. Over the last few decades executive salaries have skyrocketed. That translates into accelerated wage growth in the highest tiers of executives throughout American business, and it affects every company.

What that meant for our company was that if we just froze the wages of our most senior team — less than 20 executives - we could radically increase the wages and improve the lives of nearly 500 of our teammates.

The conversation with our executives was straightforward. We were in the midst of a turnaround. We were demanding much from every corner of the company. Small financial sacrifices from those at the top could be life changing for those at the bottom of our wage scale. We needed to do it to build a real sense of Team CareCentrix. They agreed.

And it worked really well. Duh. It drives me bananas that more companies don’t see the benefit of doing this versus implementing compensation policies that serve only to line the pockets of the people in char— oh waaaaait, it actually makes perfect sense why this is happening. The shareholders of these companies should start calling bullshit on that sort of behavior with more regularity though.

See also the founder of Richer Sounds retiring and transferring 60% of his company to its employees, with workers also receiving £1,000 for every year they’ve worked for the company.