[mjfern]

It's great to see a founder CEO (Hamdi Ulukaya) making a bold ethical move like this to support his employees. It's not flashy or earth shaking, but it's very real and it will definitely change many lives for the better.

This story reminds me tangentially of the time when Hewlett and Packard, when faced with a downturn at HP, decided to cut pay across the board so the company could avoid layoffs. Once HP recovered, I'm assuming they reinstated previous salary levels and then some. HP then benefited from a highly committed and skilled workforce who deeply respected their leaders and company.

Unfortunately, these stories reflect the (very rare) exception and not the rule. Today, we're much more likely to see CEOs and executive teams earning (multiple) millions in salary and options, all the while they are outsourcing jobs, implementing layoffs, converting full-time jobs to contract and part-time jobs, and so on. These CEOs are extracting as much wealth as they can, at the expense of their employees.

We desperately need more ethical, bold leaders like Ulukaya, Hewlett, and Packard who are going to shape the future of business; a future that is kinder, compassionate, and community-minded.

[morgante]

> This story reminds me tangentially of the time when Hewlett and Packard, when faced with a downturn at HP, decided to cut pay across the board so the company could avoid layoffs.

It mystifies me that cutting pay instead of getting rid of deadweight is seen as noble or honorable.

If I were working at HP, I would have quit the second they decided to cut my pay just so they could avoid needed firings.

[mooreds]

> If I were working at HP, I would have quit the second they decided to cut my pay just so they could avoid needed firings.

I sympathize with your viewpoint, but I think it depends on whether you see dead weight. If you are on a great team with no dead weight, a pay cut to keep everyone together would be far more palatable.

[eru]

Especially, if you get backpay later, or get at least more equity to make up for the pay.

Even if that equity is depressed in value for a bit. `Bailing-in' creditors is actually a common technique for financially struggling companies. Employees are a kind of creditors.

[jagtesh]

I think the key here is motivation. When cost cutting is the motivation, managers are told to remove X number of people from the department, even if they all perform their jobs well. This is more common than you think.

[mjfern]

If you're careful about hiring and put in place the right incentives, then there doesn't have to be much dead weight. And if there's little to no dead weight, then I think it's very noble and honorable for a company to cut salaries across the board to avoid layoffs. It's certainly a lot more noble and honorable than a company that provides its CEO a salary that is 204x that of its average employee (https://www.glassdoor.com/research/ceo-pay-ratio/).

[maxxxxx]

For some people and at certain times it's not that easy to find a good job immediately after quitting. If this had happened in 2001 good luck finding a job!

[SilasX]

I strongly suspect that they did experience this sort of "evaporative cooling" of workforce quality when they made that decision (or quietly reversed the paycut with targeted "raises").

Ditto for GM when they offered all union employees the same (formula for) buyout from their contracts -- the best ones take it and leave because they'd get the money and the new job; the poor performers know they can't last anywhere else and stay on.

[PhasmaFelis]

How do you know they were dead weight? Why do you assume that getting rid of employees (who are still providing value to the company) is necessarily a better move, financially, than reducing pay?

Hell, for that matter, why do you assume that you wouldn't have been among those deemed "dead weight" and laid off?

[morgante]

> How do you know they were dead weight?

I've never seen any large company which didn't have at least some employees whose value was less than their salary. Frequently, such employees can even confer negative value.

Moreover, even if you don't have any deadweight, you do have an ordering of employees. Your top employees are the ones most able to find a job elsewhere and hence very unlikely to accept a pay cut.

> Hell, for that matter, why do you assume that you wouldn't have been among those deemed "dead weight" and laid off?

I don't. Even if I were supposedly in the "dead weight" I would rather be laid off, get severance, and find a new job which would pay me the salary I had negotiated previously. A pay cut is changing the terms on which I agreed to work and would frequently push the job below my BATNA.

[gech]

Are you a wolf, or a sheep?

[eru]

I agree with most of what you say in terms of valuable strategy to keep your employees happy and loyal.

From an ethical point of view, outsourcing is great. It provides jobs for people in poor countries.

[downandout]

>From an ethical point of view, outsourcing is great. It provides jobs for people in poor countries.

I disagree. Even in today's global economy, the country in which a business is based seems to have a significant effect on its prospects. In 2014, 19% of US households with children were food insecure , and 46.8 million people were in poverty [1]. Given the widespread poverty right here in the US, is it ethical for US companies - that benefit to at least some degree from being based in the US - to export jobs to other countries?

[1] http://www.feedingamerica.org/hunger-in-america/impact-of-hu...

[aetherson]

Yes.

Your two arguments appear to be:

1. There is poverty in the US. Of course there is. But there is much worse and much more widespread poverty in nearly every other country in the world.

2. Companies "benefit to at least some degree from being based in the US." They also benefit to at least some degree from the economic participation of hundreds of other countries. Even if "that poor person in Asia hasn't done anything for me, so I'm gonna give my money to someone ten times richer" were moral (which it's not), it's not even true that that person has done nothing for you.

[sooheon]

To your point 1, some could argue:

Yes, outsourcing employs poor people elsewhere, but at 1/100th the cost. So the overall transfer of wealth is reduced, and global wealth gap increased. Also, given the intricacies of economic development, it is debatable whether an influx of outsourced jobs and factories (which may feed workers, but hinder formation of local industries) is better for the poor of that country. Just pointing out that it's not so easy to make a claim that outsourcing is categorically better for poor people anywhere, all things considered.

[eru]

Is there any evidence outsourcing hinders, rather than helps formation of local industries?

As far as I remember, foreign direct investment has a pretty good track record in terms of helping countries develop. (As opposed to eg loans to businesses or government. Loans can plausibly lead to financial instability, when the hot money comes in and again when it leaves.)

[sooheon]

I won't claim that it's empirically proven to be harmful, obviously there are so many intricacies in every case. However, I don't think it's clear that it's an obvious boon for the country either.

S. Korea's development, for example, has shown that export oriented growth, where the margins between international prices and local labor costs are enjoyed by the exporters, is one of the most powerful ways for an economy to grow. Outsourcing, OTOH, is guaranteed to funnel those margins back to the multinational, with little but the pittance wages and some nominal tariffs left behind for the people of the country.

[WWKong]

You could replace "US" in your argument with the county, state, region, continent or earth. Where do you draw the line? You want to see people of earth get jobs or people of americas or people of Nebraska? All man made lines on a map.

[sooheon]

But the people of the world do exist within man-drawn squares, with vastly diverse internal situations. I don't think that it's obviously more ethical to employ someone in China for 12c an hour, over someone in Nebraska for $12. It's debatable, sure, but hardly a foregone conclusion.

In my own country of S. Korea, the greatest economic boon of the 60s and 70s was mobilization of our cheap labor to create and export ourselves goods like wigs and textiles, plywood, etc. This allowed local corporations to reap the margins, and the profits stayed within the country (chaebol are another matter...). With outsourcing, the profits go the multinational corporation, and none of the increased margins made possible by the cheap labor ever gets distributed to the country of the laborers.

[bobosha]

Well companies like GE, Cisco, IBM earn >50% of their revenue ex-US, so you would expect a corresponding outsourcing - offshoring is the correct phrase here - of jobs to countries where they get revenue.

[eru]

Not all companies are based in the US in the first place. People worry about outsourcing in other countries, too.

[existencebox]

I agree, however, I don't see the incentives that would motivate change to the current system.

Where is the mass employee outrage and "voting with our feet" for the wage suppression some of our largest employers supported? We can all have high minded ideals but at the end of the day our options are often VERY limited, as few would willingly take a massive pay cut for their ideals, especially given the inherent commons problem in that many people would need to do so simultaneously for the powers that be to "Feel" it.

How do we actively motivate this change when most of the power and incentive dynamics are _not_ in the employee's favor? (I mean this as an honest question, I don't see any easy answers)

[subpixel]

Interestingly, I recall reading a story suggesting that the CEO was on his way out of the company less than a year ago, when the whole Idaho plant expenditure looked like a failure.

The turnaround is a nice reminder that running a business sometimes requires ignoring the people whose job is to second guess and critique your every move.

[mrbgty]

"Once HP recovered, I'm assuming they reinstated previous salary levels and then some."

No way this happened.