Over the years, I have frequently spoken out against companies that preach a “we’re-all-in-this-together” ethos while tolerating Austrian-Afghanistan disparities in executive-employee pay. But I have offered little in the way of a real-world solution to such hypocrisy. So, as I prepare to discuss our philosophy at Seventh Generation with our newly formed “compensation committee,” I want to take the opportunity to share my evolving thoughts with all of you.
Some facts to consider:
a) Over the past 25 years, CEO pay has risen exponentially, regardless of the economic or political climate. It increases faster than corporate profits, economic growth, or average workforce compensation, according to Fortune magazine.
b) Fortune also reports that a recent study by the compensation-consulting firm DolmatConnell & Partners found that CEO pay in the companies of the Dow Jones Industrials increased at a blowout 15.1% annual rate over the past decade.
c) Three years ago, the CEO-worker pay gap was 400-to-1. In 2002, the ratio was 281-to-1, nearly ten times greater than the 1982 ratio of 42-to-1.
d) The most recent study from the research firm Towers Perrin showed that only 21% of employees felt engaged in their work and that fully 38% feel partially or fully disengaged. (Everyone else is somewhere in the muddling middle.)
The purpose of Seventh Generation’s compensation plan
To share our financial success and celebrate our employee owners for their contributions to the growth and success of the company.
To compensate in a way that recognizes both short-term and long-term value generation for all employees, in a manner that shares the total value created in an equitable way with all other shareholders.
To ensure that:
1) passion and commitment are elevated within the Company to meet or exceed annual budget and strategic plans;
2) our employee-retention goals are met and all employees feel fairly compensated.
At Seventh Generation, we are all employee-owners. We share the responsibility of coming together to identify and deliver on our strategic goals. We are all accountable for our business success, for fulfilling our Global Imperatives, and for catalyzing the changes that the world needs all of us to make. To that end, Seventh Generation strives to provide benefits and programs that acknowledge employees as owners of the company and recognize their achievements.
Part of that recognition comes in the form of an annual bonus based on the company’s performance, with a payout that includes cash and shares of stock. If the Company meets or exceeds its profit and revenue goals for the year, all are eligible to share the rewards.
Our Compensation Philosophy
1. In general, the vast majority of US businesses share their wealth extremely unequally.
Equity & Justice
2. Our commitment to “Equity & Justice,” which is part of the Company’s “Essence,” must spread from the inside-out.
3. CEO compensation must be reasonable when compared to both the average employee and the lowest paid employee.
a. In 2008, my base compensation will be less than: 14 times the lowest paid full-time employee and 5 times the average employee
b. In 2008 my total compensation will be less than: 30 times the lowest paid full-time employee and 10 times the average employee
c. Both Whole Foods and Ben & Jerry’s have similar salary caps.
Benefits
4. Our benefits must be “best in class” to attract world-class talent.
5. Everyone should be covered by health insurance that is primarily paid for by the Company.
Employee Owners
6. Everyone in the company should view the business as an owner. Thus, on the day they are hired, they should get a meaningful grant of Seventh Generation stock.
Bonus
7. All employees should be bonused based on the Company’s performance, NOT on individual performance, because all employees must always do what’s best for the whole company. Everyone participates in the bonus pool.
8. Our cash bonus program must be competitive to attract and retain talent.
We welcome your comments!