I'll be honest, having worked at companies with profit sharing, you're better off taking the raise unless you're working for commission, and even then now is a rough time to be on commission.

If you can afford to risk your income on your company's fortunes, start your own or join a startup with a founder who seems trustworthy.

For me and most people, predictable income is much better than risky equity.

I don't really disagree with you, but I also don't think you're really responding to what the OP was saying.

He isn't saying: We want a profit sharing agreement instead of salary.

He's saying: Extra salary that is immediately covered by the company raising the cost of their goods (rather than say - reducing executive pay, removing middle managers, or making less money for shareholders) doesn't get us where we need to go.

Because if the cost of buying all your goods is going up in direct relation to the raise in salary, (and this is happening across the market: inflation) - you aren't really getting a fucking raise at all. You're just floating.

The answer instead (at least in my opinion) is to change tact on how companies prioritize.

1. Workers need to be valued above shareholders (drive long term growth rather than sacrificing the golden duck for next quarter's profit)

2. Discrepancy between CEO and average pay needs to be curtailed - the current balance is driving a huge wedge into the relationship between a company and its employees.

3. Remove the inappropriate leverage that companies wield by controlling your healthcare/medical insurance costs

4. Remove pools of labor that are self-defeating: Jobs that pay so little the employee must be subsidized by government programs to live (think walmart/uber/etc) The best course of action here is likely labor movements (unions)

I really think decoupling health insurance from employment would go a loooong way to fixing some things and be such a long term beneficial thing.

I'm not sure the best way to do, but I would love to see it happen.

I would also add that stock compensation needs to be vested over a longer period. This would help discourage short term thinking.

German readers, in your opinion, a Betriebsräte deal with many of these problems, no?

Well, not necessarily. In terms of raises/salary increases that's more of an issue for the unions than the Betriebsrat, since it usually concerns a whole industry and not just a single company.

As for the "valuing workers over shareholders" stuff ... Well, maybe? To be perfectly honest this isn't really what a Betriebsrat is about. I mean sure, they do have some influence, but in general their territory is more in terms of company operations, less in terms of how much is paid out to shareholders.

To be perfectly honest the Betriebsräte are facing much of the same problems that most other elected bodies are facing in the western world (or at least Germany). Sinking voting share, less and less people caring about it and as they kind of loose some soft power.

They still have the hard power guaranteed by law of course, but their soft power is essentially waning.

Thank you for the perspective. It helps to know more about the successes and failings of institutions before I go about suggesting their use. :)

A lot of people think that companies aren't paying their employees well because they're greedily hording cash and if they'd just give that cash to their employees, wealth problems would be solved. I would suggest to these people to spend some time looking at the largest companies in the world, taking their profits for the year, and dividing by the number of employees they have. I have done this exercise a few times. It will open your eyes about a lot of things w.r.t. business.

We here on HN are the ones who need to do this most of all because we work in the industries and companies that have for the last 10 years actually made enough money that the division results in something significant. This is not the norm. You can easily end up with values in the hundreds of dollars of profit/employee for a more normal industry. Even if the profits were 100% shared, we aren't necessarily talking about pulling people out of poverty or something.

The parasite class in society is smaller than you think, percentage-wise. Quite a lot of us go to supporting just one of them. I think getting rid of them would be a great boon... but not because simply redistributing their wealth would solve very much. The real problem they create is that they steal $X dollars and end up creating second-order effects that mean $X·Y dollars of wealth are never created in the first place, where Y is pretty significant.

I just tried this with 10 random companies from the tail end of the s&p 500, I didn't cherry pick anything:

                                 2021 profit   # employees  profit/employee
  DISH Network Corporation        $ 6.143B        16,000        383,937
  FOX Corporation                 $12.909B         9,000      1,433,333
  Wynn Resorts Limited            $ 1.205B        30,200         39,735
  American Airlines Group         $ 2.046B       123,400         16,580
  Bath & Body Works Inc           $ 3.096B        92,300         33,542
  Hasbro Inc                      $ 6.42B          5,600      1,146,428
  Advance Auto Parts Inc          $ 4.929B        68,000         72,485
  MGM Resorts International       $ 9.68B         74,500        129,932
  Hormel Foods Corporation        $ 1.928B        20,000         96,400
  Paycom Software Inc             $ 0.89B          5,385        165,273

American Airlines LOST $2Bln in 2021.

I just spot-checked 1 randomly, and didn't cherry pick.

Goes to show the accuracy of the google info box!

For Amazon 2021 it seems like quite alot though.

33,3 billion USD profits/1,622,000 employees = 20k USD/employee

The median employee made 29k in 2020.

https://www.businessinsider.com/amazon-employee-salary-pay-m...

Maybe they have a lot of part-time employees.

Profit sharing doesn't necessarily mean equity. It can be a percentage of profits split between all employees.

Of course that, like equity, doesn't substitute a decent salary, it just complements in a way that gives positive incentives.

Whether equity or paid out monthly, it's variable income that most people can't count on. When you're in a big enough company that you individually can't feel yourself moving the needle, the end result is that it's not much of an incentive. This is especially true once the company gets over a few hundred employees.

Source: Have worked for profit sharing companies before.

Joining a startup isn't a good way to share in a companies upside unless you're one of the first few employees. You only share in the upside of wildly successful companies, and even then it's many years delayed from that success and has the potential to be whittled away by preferred rounds ahead of you, executive carve outs, etc.

Gravity payments raised salaries as a vindictive measure against a co-founder / brother who sued the CEO for taking a salary of $1million, which was way too high for their revenue at the time. Dan Price took all the profits they were making, divided by the number of employees and gave everyone that so the brother would make no money on his equity. This was a way to screw his brother and fend off the lawsuit at the same time. A bunch of senior engineers quit because they did not receive equal pay increases. He also divorced his wife days before increasing his salary from $50k to $1m lol. Guy is a scumbag.

It goes beyond just that. When interviewed about the matter by Bloomberg [0], the CEO lied about the lawsuit timelines, and when he got called out by the interviewer, he repeated the lie and cut the interviewer off. The CEO claims he got sued for raising the salary for all the employees, but the lawsuit against him was served weeks before (and it was for a completely different reason), and he signed it himself. But he claimed he hasnt even heard of the lawsuit before he raised the salaries.

Oh, and he pretty much unambiguously abused his wife (Chris Brown style, i.e., pretty violently), but was also super dodgy and aggressive about it with the interviewer. I found that Bloomberg investigation and interview to be pretty in-depth and well done.

0. https://www.bloomberg.com/features/2015-gravity-ceo-dan-pric...

This is spot on. I think there is a nuance across industries that is often missed here too. Certain industries really can’t raise prices or wages without tanking the business. Restaurants, mechanics, doctors, etc are often operating on razor thin margins with prices set by the market. For medical/dental/therapy their prices are often set by insurance reimbursement rates that haven’t kept up with inflation.

The flip side is like you said, companies raking in record profits with massive cash on hand. They could easily afford to share more with employees and would probably benefit from a happier and more invested work force. The stratification between C-level and everyone else is higher than it’s ever been.

Restaurants largely operate on razor thin margins because the surplus value is taken by the landlord.

Similarly for McDonalds corporate often takes the surplus value & is increasingly the landlord too.

So McDonalds franchisees cant easily afford a payrise from profit margins but McDonalds as a whole most certainly can.

This is also why the restaurant industry minimum wage hikes havent meant any fewer restaurants anywhere.

> the surplus value is taken by the landlord

Hm - interesting theory. The landlord does have some expenses, though: upkeep on the property and taxes, as well as some bit of "float" for times when the property is vacant. There's a definable "margin" there, too, but I wouldn't know where to look to find out what.

> There's a definable "margin" there, too, but I wouldn't know where to look to find out what.

Not enough of one to make becoming a landlord a guaranteed way to earn an easy profit, or everyone would do it. Lack of startup capital wouldn't be an issue either—banks would be happy to front the cost if you can prove the venture will succeed well enough to pay them back with interest.

> But I think what we really want is a bigger share of the profits a company makes without them raising prices.

Only as long as you're willing to have the same share of the losses, too, but most aren't.

Of course everyone wants to get max(salary, share of profits, commission) when the company registers losses, and sum(salary, share of profits, commision) only when the company registers profits, but I just don't see such a thing ever working.

What does this even mean? do you believe C levels and board members personally mope out of the office with dog-eared pockets each time the business loses a customer? do you assume the losses arent already gifted to the workers in the first place in the form of salary cuts and mandatory overtime?

the issue is wealth inequality. that a CEO can earn tens, if not hundreds of times more than a line worker without so much effort as to even show up to the office, that is the issue. that a cloistered elite of leadership exists seemingly immune to even the worst outcomes of business, only to arrive in yet further opulence after they retire in golden parachutes flush with shares of the company the excess capital of the workers themselves built in the first place.

if you want people to show up after the pandemic to swing hammers and build products, you need to give them more than the cost of the gas to get to work and a half hour lunch.

From https://www.cnbc.com/2021/09/15/in-2020-top-ceos-earned-351-...

"It used to be that in the 1950s, 60s, and 70s, CEOs made 3.3 times what a top 0.1% earner made. Now, it's more than six times," says Mishel. "CEOs now are making 351 times that of a typical worker, but back in 1978, it was only 31 times. In 1989, it was 61 times."

And it's not just CEOs. IMO there should be federal guidelines that total compensation in public companies should be more fairly distributed, ie, executive staff can only make X times more than average worker pay. But you know what companies would do, right? They'd fire all the employees, setup mini companies to employ the workers, and bypass the regulations.

It’s worked quite successfully, in this country (assuming USA), in the past. It currently works reasonably well in Japan, where executive pay is capped as a multiple of the lowest paid worker at the company. In the US, executive pay has never been higher relative to average worker pay.

The gap in wealth is real, it’s increasing, and it absolutely does not (in fact, it cannot) need to be this way.

But America being the land of greed and selfishness, there would be a simple solution: Split the company into two legal entities. One which employs all the jamokes getting next to nothing and another which employs the C-suite folks. Even without such a dramatic split, a law like this would likely mean that they’d shift all low paid employees into contract roles.

None of which is to say that I disagree with the goal, just that one should never underestimate the greed and psychopathy of the typical C-suite individual. These are people who will have employment contracts that guarantee them a multi-million payout if they get fired because they’re shit at their job.

I mean sure, but the argument of "people will just try and work around it" can be made for basically any regulation ever put in place. That doesn't negate the importance of the regulation, and it doesn't make the regulation ineffective. It only acknowledges that the game of cat and mouse between regulators and the people playing the game exists.

It's in the same vein of "criminals will just find a way to get guns if you make guns illegal". Some will, certainly, but the argument itself is an argument against the rule of law entirely. Some criminals will speed on highways, some criminals will steal, etc. But laws are still effective in curtailing this behavior on the macro level.

Most works share disproportionately in the losses… increased workloads, layoffs, stagnant salaries, etc.

Remember it’s common for executives to get bonuses when they lay off the workers.

Laying off workers is often the right thing to do for the health of the business. Companies are not make-work schemes, designed to employ as many people as possible, and shouldn't be. They're there to provide value for customers, as defined by customers demonstrating that they value the thing the company provides more than the money they give up to get that thing, and constrained by the fact that the business itself has to be profitable to be sustainable and keep providing that value. That sustainability includes the capital needed from investors to keep the business producing and innovating. There's competition for that capital (and there should be!), so if returns are higher elsewhere, that broadly means the alternate use of capital is providing value to customers more efficiently.

If someone at the company identifies a set of inefficiencies in producing value for customers, and remedying that involves laying off a bunch of people, but ends in providing that value more successfully, that person has been responsible for a lot of value creation.

Layoffs make sense, but not simultaneously giving executives bonuses.

Why not? Bonuses should be about creating value, and value can be created at the same time as some positions need to be eliminated.

The executives who are responsible for all the excess hiring should also be removed for their failures as well so they can be held responsible for their mistakes.

Maybe, and that sometimes happens... when it was definitely a mistake. But it often wasn't; the company has to make the best decisions given the information it has, AND things change. You don't fire people every time they make a mistake -- you fire them when you don't think their judgment is adding value. And while it might seem like that should be different when the mistakes are more impactful, it just means companies need to hire as well as they can (which often involves high compensation) to make the best bets on that judgment.

Judgment isn't about having been right -- it's about making the best decisions given the information you have at the time, and that means that some good decisions turn out not to work out in practice. Companies have to try things out to innovate and find new, better ways of creating as much value for customers as possible. You might hire 50 people to develop a new product line or offering, because it seems like it's going to work. If it then almost works, but the margins aren't good enough and it looks like there's untapped market, you might hire 100 more to scale it up because it looks like it will work at greater scale. But ultimately, if you end up not being able to make it work, you have to shut it down. Maybe some of those people fit elsewhere in the company, but usually that's very few. So layoffs are needed there, and it doesn't mean someone needs to be fired.

In many cases of layoffs, the employees were profitable... until they became unprofitable because circumstances changed. That's often the case at big companies. You find success with a product, but then consumer tastes change, or someone innovates better than you do (or gets luckier). You can't just keep that unprofitable product going to keep people employed -- someone has to make the hard call to hard pivot or exit that market. It doesn't mean the people who set that product line up made a mistake and need to be fired.

I usually see this argument about the utopian company which shields employees from the losses in debates. In the real world a company making losses cuts down on employees, wages, increases working hours for same pay ; all negatively affecting the employees in a desperate attempt to survive, failing which the company shuts down causing loss to all employees. They are however not sharing the increased profits with the employees when they are highly profitable, they don't hire more people than required because profits are more.

I see there is a market value that the company has to pay for labor. The additional profits are generated due to the performance of the employees, they should get a share in the profits for their contribution, the investors putting in the capital are currently taking 100% of the profits. There should be a share in this for those putting in their sweat and brains.

> In the real world a company making losses cuts down on employees, wages, increases working hours for same pay…

All of that only affects future earnings. The employees' wealth (savings) is not tied up in the success of the company—they can quit at any time and go work somewhere else. Everything they've earned up to that point is theirs to keep, along with intangibles like training and job experience they've received along the way. This is their share for "putting in their sweat and brains".

For the shareholders, on the other hand, a company taking losses doesn't just impact future income. Their entire investment is at stake.

If an employee prefers equity rather than income they are free to purchase shares in the company with their earnings; as a rule, though, employees just want to put in their hours and get a steady paycheck which they can spend or invest as they please. They don't want to be forced to invest in their employer such that the prospect of their employer going bankrupt threatens both their paycheck and their savings.

The investment of shareholders is at stake irrespective of whether they share the profit with the employees, success of the company is a different function altogether.

>For the shareholders, on the other hand, a company taking losses doesn't just impact future income. Their entire investment is at stake.

Investors who do not get more returns in the companies compared to a debt instrument will take their investments to companies which can offer better returns, that is how they should manage their risk without getting bankrupt.

There is a chart above where some companies have profit/employee close to a million dollars, intellectual property of the employees is not valued enough, value is only attributed to the capital invested , which if you look at companies which are overvalued is not the rarest commodity; employees are not a rare commodity but good employees are.

> Investors who do not get more returns in the companies compared to a debt instrument will take their investments to companies which can offer better returns….

Of course, but to do that you first have to find another investor willing to take your place by buying your shares. An individual shareholder might leave but the shareholders, as a group, are just as invested in the fate of the company as before.

I agree, the company in total loses value when it shuts down, the employees are left without any jobs causing loss of livelihood , investors are left with a loss in share value.

Employees can get another job , investors can diversify and manage their portfolio better, there usually higher risk inherent when higher growth and dividends are expected.

What I am saying is everyone is affected when a business shuts down, its not something which affects only investors, employees are also affected, but when the company has record profits in most cases it is provided exclusively to investors and no portion on the profits are shared with employees. I see salary as a way of booking the employees time, a share in profits is what they should get for how productive they are in the booked time.

> Employees can get another job, investors can diversify and manage their portfolio better...

Employees can get another job after the fact. Their skills and experience are mostly transferable. I'm not saying it isn't disruptive, but they haven't lost any principal or equity, just the opportunity to sell more labor to that particular employer in the future.

For the shareholders at the time to business goes bankrupt it's too late to try to diversify. Their shares are worthless and they are out whatever they paid for them. (BTW, telling them to diversify ahead of time is equivalent to telling them not to invest as much into this company... which isn't great for the company or its employees.)

> ... no portion on the profits are shared with employees.

The employees' fair share of the profits is their salary or wages (plus performance bonuses where applicable). If they want equity they can buy it with their earnings, but in general it's a bad idea to hold too much equity in your employer. The trade-off for sharing in "record profits" is sharing in the losses when the company doesn't do as well.

This is good start for principled discussion using relevant data.

First data point: "Share of Labour Compensation in GDP at Current National Prices for United States" (1950 -) https://fred.stlouisfed.org/series/LABSHPUSA156NRUG

Second data point: "Employment Cost Index: Total compensation: All Civilian" (2001- ) https://fred.stlouisfed.org/series/ECIALLCIV

Discuss.

Be careful on this. Yes some FANGs make a lot of money but most tech companies lose every year. You want to give up wages to help pay the deficit?

I think the awareness of that reality would turn a lot of heads and make many more developers think, “wait, is this a bubble?” instead of developers jumping from 300k to 400k VC funded niche simple-website-as-an-app jobs with 10 to 500 employee growth in 2 years, saying “dude trust me this company has a future”

A zillion 'tech' companies with massive scale operating losses (hey would K8s help with the scaling?!?) are about to find out what it's like when the financing spigots get turned off. Their employees will definitely take a large share of the hit.

In the public version of that you can already see how that's working out, as their stocks have routinely collapsed by 70-90% over the past year. Those companies will either have to sell themselves off for a fraction of what they were formerly worth, slash expenditures heavily (ie fire employees and cut expansion plans), or heavily dilute to raise some funds and pray the beating stops before they run out of money.

The crash that the pandemic should have brought forth (and nearly did), is here now. They temporarily papered over the disaster, and the bill has arrived regardless as it always does.

Some examples:

Snowflake: $715m operating loss on $1.2b in sales (lol) | Unity Software: $591m operating loss on $1.2b in sales | Roblox: $511m operating loss on $2b in sales | Palantir: $336m operating loss on $1.6b in sales | Robinhood: $2b operating loss on $1.6b in sales (lol) | Affirm: $632m operating loss on $1.2b in sales | SoFi: $411m pre-tax loss on $1.1b in sales | Twilio: $936m operating loss on $3b in sales | Uber: $2.7b op loss on $21b sales | Lyft: $865m op loss on $3.4b sales | UiPath: $500m op loss on $892m sales | Asana: $265m op loss on $378m in sales (lol) | Lemonade: $258m pre-tax loss on $149m sales (lol) | Fastly: $232m op loss on $371m in sales

And so on.

Some of these loss vs sales ratios very much resemble the excesses of the dotcom bubble. When the music stops (as it has), the losses become a lot more difficult to manage, the market smashes the stocks, customers pull back in recessionary environments, losses get even worse, companies have to slash and burn, and a lot of things go sideways in that hurricane.

Companies like Twilio have seen their stocks implode by 80% for good reason, they're bleeding very badly, their businesses are unsustainable as is. Lyft is a dead company walking, they have to sell themselves off if things don't promptly turn around in the economy and market (which appears unlikely); they're 75% below the IPO levels, it's a disaster for nearly all the shareholders (including employees) that have held.

How much is eg Asana really worth when their business consists of $265m in op losses vs $378m in sales? It's a joke. Discount it by 90-95% from the top and that's probably a reasonable start to the grinddown ($145 to $18 so far).

How about Fastly? They're dead. They probably have no choice other than to sell themselves off. For fiscal 2021 they added $64m in sales and $112m in operating losses to get that. Aggressively slam the brakes and their stronger competitors will just eat their business, don't slam the brakes and they're dead. $64 to $10 so far on the stock. They're dinner for Cloudflare, Amazon, IBM, someone.

These guys are all seriously fucked in one way or another. Those op losses vs sales are comical. Be sure to say hello to the brick wall you're about to slam into. They have several bad options to choose from to start dealing with their epic scale losses (and if they don't, the market will just smash their stocks that much more), including praying that the bad things just pretty please stop happening.

Adding blank lines between the companies would format it in a rough table.

But yeah, these are nuts and almost all these companies were dependent on "stock go up" and now the chickens have come home to roost. They'll all be acquired for pennies on the dollar by big players (though the really big ones like Uber might survive by massive purges).

Roblox and Robinhood are the most amusing, how can you screw up a money spigot so badly?

I dislike the extra spacing that HN requires for that style. And unfortunately I'm not aware of any way to do line to next line without the surplus spacing. I have always thought it would be a rather useful formatting option here.

I've used the code option at times [3487]:

  Text after a blank line that is indented by two or more spaces is reproduced verbatim.
  (This is intended for code.)

[3487] https://news.ycombinator.com/formatdoc

Of course there are a lot of big FAANG type companies, and there are a lot of startups with VC funding. I used to work for Google and now I’ve run my own company for the last 10 years without VC funding. I imagine there are many many countless companies similar to mine. I focus on growth and we never have a ton of money. If we get more money we put it into our current and expanding workforce. We do keep some money in the bank but only so we can make sure our company doesn’t fail at some point. But companies are fragile things, if we lose enough employees and can’t get new employees and train them fast enough we probably fail. If we raise our salaries too high and can’t get enough revenue in return we fail. If we have a sales guy who we pay $70k base with $150k commission, then he leaves for $140k base job and we have to in turn hire a $130k base salary guy with $200k commission - what do we do? (This is a real world example) - well we now have one sales guy for almost the same price as we were paying two before. Basically we need to make more money or let people go. A single sales guy can only have so many conversations so we probably need to raise our cost of our product. Which assuming our customers even accept it, will increase their costs and it just keeps repeating down the line.

The current type environment is not kind to my type of company and it definitely will cause a lot of companies to fail. We have an amazing product with great demand and i think that’s what has saved us, but please imagine a company that is similar to mine. We try everything we can do to retain our employees, pretty much every dollar we make goes into employees since our product is software. When we had bad years I set my salary at $40k since i wanted the company to survive and we were still small and it made a difference. A ‘normal’ company like mine is totally restrained by cash flow, its a pretty simple equation. When you start having costs increase (i.e. salary) you have to balance it out somehow with more revenue somehow or reduced costs. A gradual increase is always better so we can start planning for it, get loans, get investment, gradually increase our price. Price shocks and huge changes are never easy to handle. I believe companies like mine are doing something good - innovating and creating good products and providing a much better service to our customers than Google and others can do by the virtue of us still being small and nimble and customer focused.

Is Gravity Payments actually paying well, or is their CEO just very actively marketing on LinkedIn? (I blocked him last year, I find him and his posts annoying)

https://www.payscale.com/research/US/Employer=Gravity_Paymen...

The average at Gravity Payments is $91k/year and the average across the US is around $88k? https://www.payscale.com/research/US/Job=Software_Engineer/S...

Look for a company that has a profit sharing program.

https://en.wikipedia.org/wiki/Profit_sharing

Some businesses have negative profits. If you want a share in the profits you have to have a share of the losses as well. That's what the bosses do.

Sort of. The bosses have shares that go down in value, but it's not like they are paying into the company from their personal money to balance the books in most cases. (Not that this never happens, but it is rare I bet.)

Many founders will do this directly or indirectly. Most businesses are not tech startups from the last 20 years and don't have access to capital outside of a bank loan to the founder(s).

Worker-owned should be the norm, not the exception!

Does Dan Price give out any equity to his employees? It sounds like what he's doing is no different than Zuck taking a $1 salary.

This is not true. If it were, then inflation would run away. Prices influence demand, so companies can't just raise prices whenever they want. But capital in itself also has a relationship between supply, demand and price, often called rent-seeking behavior.

If you are interested in this kind of topic, look into microeconomics, then macroeconomics.

Supposing that a company could always exactly offset rising costs by raising prices assumes that such a company was not setting an optimal price in the first place. If they could increase profits by raising prices, they would have done so already. Low labor costs aren't what's keeping McDonalds from charging $15 for a cheeseburger, it's the fact that nobody would buy a cheeseburger for $15.

Couldn’t employees buy stocks in the company they work at and receive dividends?

These capitalist demands affect the morale of workers who don't get compensated fairly. It also makes it much, much more difficult for small businesses without $1B of borrowing power to compete with public companies. This limits competition (sales), which is bad for consumers. It limits competition (hiring) because small businesses simply can't pay (even half of) what a lot of public companies can.

So consumers lose. Workers lose. Everybody is stressed out and pissed off. The upper class is oblivious or doesn't care.

Another economic dynamic outside of major cities is that housing might be more affordable, but goods and services (mostly) cost the same as anywhere else in a global economy where prices are controlled by the biggest players.