Spolu 17: Management Salaries, Part 2

In the previous section, I created a hypothetical spolu with 100 employees, a pre-payroll cash flow of $7,000,000, and a manager that is paid $800,000 a year. That renumeration is based on the 20x multiplier of lowest to highest paid worker.

Even though the spolu CEO is paid a lot less than the corporate CEO, many readers would not want to pay any manager $800,000 a year. I will offer a few more perspectives on this topic.

Management comes with talent, education, and experience. Many of the world’s CEO’s did not get their positions mostly by luck, nepotism, or favors. In their climb to the top, they gained a reputation of leading successful business projects. Whether we like it or not, such talent is in short supply. It needs to be adequately compensated to today’s economic culture.

Would a proven CEO be willing to take a substantial pay cut to manage a spolu? I think some of them would. Some CEOs do have a social conscience. But, for some businesses (like those businesses with many employees), paying managers just a bit more than the employees is not going to find the right management skills. So a salary of $800,000 a year is not unreasonable for this kind of business — in these times.

The spolu culture will evolve. Not only will employees be more motivated by the profit-sharing nature of the spolu…