The inlaid walnut table in the corporate boardroom held 12 on either side and two or three at each end, and the execs were all perched, prepped to pounce, when I dragged in my 2001 budget – 1015 pages of spreadsheet and other sheet.
As division CEO of a NYSE-listed publishing company with nearly a billion dollars sales, my pitch was explain how I would increase sales, restrain costs and improve the value of the newspapers I published.
What could go wrong? In the past year sales were up, but more important, the bottom line jumped from about a $200,000 loss to an $860,000 profit before taxes.
Since most of my employees were salaried – meaning they worked long hours without overtime compensation – my proposed budget included a four percent average pay increase. That four percent, I was told, was a big mistake.
Two percent, no more! Two was the flavor of the year and every one of some 220 newspapers in the East and Midwest would get the same, regardless of profit or loss. The crowd at the table frowned. Didn’t I read the fax ordering two percent (that tried to ignore)? How dare anyone equate salary increases with a huge jump in profits, they advised with condescension and some contempt.
Earth to Fred: I realized the executives, who run huge companies, are not concerned with making employees happy. Their goal is to make themselves wealthy.
What happened to the two percent the workers lost, when I abandoned four percent?
Most went to buying more properties to increase the stock price. Some was spent on new offices to impress the bankers, who funded the company. A little went to conferences for executives like me, where I was told those cigars we coughed, cost $30 each, and that sour wine was $300 a bottle. You can do a lot with two percent.
And the other reason to stiff employees and increase profits, was something called “stock options.” These were documents that allowed you to buy company stock in the future at today’s price. If your option was for $10, and five years from now it was worth $100 a share, you could pay $10 for the $100 stock and make $90 for each option.
Granted thousands of stock option shares, I believe just their existence had to color my management view, but subsequent sudden resignation rescinded the options, which were later worthless for all, when the company entered bankruptcy.
My experience with that budget proved to me there is such a thing as trickle economics, but the direction is only trickle up to some banker, manufacturer, politician, corporate lemming, or even to a developer like Mr. Donald Trump.
It’s not just huge corporations. Lowering taxes for smaller companies might spark a rare twinkle of kindness from a major trickle of cash, but most owners share a philosophy explained to me in the Reagan years.
With about 160 employees, one night I asked the owner why he was so highly paid – 20 times my salary – when it was the staff that actually produced the profits, not him? It was a friendly question and he answered it that way:
Fred, managers may grow the company, employees may be responsible for all the profits, but none of that matters. I decide who gets what, because it’s my money that bought the business. Everyone else works here at my pleasure.
To be fair, he was often a benevolent autocrat, who allowed lavish conferences for all employees, memorable holiday parties, and usually an annual wage hike of more than two percent. He passed away after his company was bought by a conglomerate, and that staff we had assembled over decades, mostly dwindled away from disgust or broken spirit.