Tesla CEO Elon Musk recently received a new wage package from the Board of Directors and it has caused Tesla, Musk, and the amount of Executive Pay to be in the spotlight.  For the record, Musk just received a 10-year pay package valued at $47 billion over the next ten years.

 

It is interesting to note that a judge in Delaware challenged the package even after 77% of Tesla shareholders approved of it.

 

From my point of view, Tesla is a company owned by its shareholders.  So, I wonder why a judge would have any say in the issue if the Board of Directors, voted in by the shareholders, made this agreement?

 

I think the wage and option package is a part of Tesla’s business where a judge should not be interfering.  If they have the ability to interfere here, what else could they pass judgement on. . . . could they require the car colors being sold by Tesla to only be in primary colors such as Red, Blue, and Yellow?

 

I’ve always thought that “Business is Business” and those with risk on the line – like stockholders in the Tesla case — should be the ones making the decisions.  There is a lot to think about such as employees and their welfare, but if the Board of Directors believes paying Elon Musk that much money is the best way to advance the company, they can be questioned but probably shouldn’t be dragged into court about the decision.

 

I think that way. . . and I think that is the way that lots of “old time” business owners like me think.  However, I believe times are changing in America.  Upon the Musk pay decision Seeking Alpha ran a poll that asked “Should there be limits on Executive Pay”?   And understand, Seeking Alpha is a place where investors, most who believe in “Free Enterprise” are in great abundance.

 

After 3,046 responses to the survey, almost 7 out of 10 respondents said that there should be limits to executive pay.  The actual number was 69.9% to a percentage of 30.1% that said “No Limits”.

 

I’m all for fairness and fair wages, but in a country built on free enterprise and merit advancement, I was somewhat astonished by that response.

 

Yes, executive pay can be high, but can it be worth it for the company and the employees in that company?  I believe that answer can be “Yes” also.

 

What’s the best way to handle Owner and Employee compensation at your funeral home?  I operated a funeral home with a total of six licensed funeral directors, including myself.  I never took a large monthly salary, instead opting to leave money in the checking account so we could always take discounts, etc. without ever having to borrow operating capital.

 

I also had five funeral directors with no ownership risk in the operation.  That’s not to say that they didn’t have risk because they bought a house in the community based on their salaries continuing to move forward and they invested themselves in the community. . . .which also benefitted my business.  For owners to say that their employees have “No risk” is just wrong — look at it from their point of view. . . . .However, the risks are different for owners and employees.

 

What I found worked really well at our funeral home was a profit sharing plan.  It was non-discriminatory based on your salary.  Ownership employees like me did have higher base salaries so their percentage of the “profits ownership elected to put in the pool” were higher.  Ownership was not required to put the entire profits in the pool — only what they chose.  That left other profits to be used for capital improvements or simply saved for a later period when they might be needed.

 

If you were one of our 6 funeral director employees and your salary was 15% of the total funeral director salaries, then you were entitled to receive 15% of the “Profit Pool”.  If management made the “Profit Pool” $50,000 in a certain year, that employee received a Profit Sharing check for $7,500 over and above his salary.  It doesn’t sound life-changing, but in really good years when a large amount went into the “Profit Pool”, some employees received a “Profit Pool” check of over 20% of their normal wages.

 

By the way, in 33 years of funeral home management I never had a funeral director leave my employ except for retirement.  Our funeral home grew greatly in numbers of calls and market share and I believe it was the fair compensation agreement that allowed for retention of funeral directors creating stability that was a big part of that growth.  I was eventually rewarded by divesting a 350-call funeral home rather than the 150-call funeral home that I started with.

 

Like in the Musk situation, I still believe that ownership income should be commensurate with the risks that they are taking. . . .however, even if that amount is high, like in the Musk case, the right thought process can make it rewarding for all employees also.

 

If you are a business owner, I challenge you to come up with some type of plan that will not only reward you for the risk you are taking, but reward your employees as well.

 

An interesting sidelight —  It’s Elon Musk today, but back in 2011 it was John Hammergren of McKesson Corporation.  I went to high school with John Hammergren and car-pooled to college with him and our funeral home, not too long ago, had the privilige to take care of his mother’s services.

 

In 2011, John Hammergren was listed as Forbes Magazine’s highest paid executive in America.  Forbes article.

 

John Hammergren on Leadership.

(Editor’s Note:  Pertaining to this short article on Leadership written by John Hammergren it brings back memories to me.  I can remember during our high school years when John was a carry-out boy at the local Red Owl grocery store and I remember Mrs. Beliveau, mentioned in the article, who was a somewhat persnickety mother of one of our friends!)

 

More news from the world of Death Care:

• These disabled people tried to play by the rules.  It cost them their federal benefits.  Radio broadcast and print article.  Delaware Public Radio – NPR (DE)
• Bartholomew Funeral Home debunks misconceptions about cremation versus burial costs.  Valpo.Life  (IN)

 

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