When CEOs Set Their Own Compensation

‘Founders, including myself,’ Ryan Caldbeck writes, ‘often get through the first few years by paying themselves less than market, choosing instead to use the cash on the rest of the business.'

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Here are today’s highlights:

  • Do we really want a video version of email?

  • Investing in venture capital’s leftovers.

  • With inventory low and demand high, is there any reason to advertise? 

  • Today’s Dashboard: What’s at stake for small businesses in the Build Back Better bill?

HUMAN RESOURCES

There are things you can do to lure employees back to the office: “Once you’ve addressed safety concerns, you should turn your attention to the other inhibitors. Are employees concerned about commuting times or costs? Institute flexible schedules or subsidized transit. Dreading the return to suits-and-ties? Update your dress code. Stressed about child care? Open an on-site daycare center, or invite parents to work a split day so that they can pick up their children at school, then finish their work at home. Granted, some of those changes may be pricey, and not every company can afford to add big-ticket amenities. Be warned, though, that these kinds of benefits may be necessary to lure back employees who have gotten cozy at home.” READ MORE

Loom thinks its asynchronous video platform might create a new industry—and be the future of work: “Loom's most audacious idea is that asynchronous video offers a new type of communication that deserves its place in everyone's lives. Synchronous video (Zoom and FaceTime), synchronous text (Slack and Teams) and asynchronous text (email) already exist. But there's no way to communicate with the kind of fidelity that video allows without either hosting a meeting or jumping through a lot of hoops and apps. Thomas likes to say that Loom's main competitor is typing, and so it had better be as fast to hit record as it is to hit send. The short version? Loom wants to be email on camera.”

  • “Now everyone suddenly wants to be an asynchronous video messaging platform. Dropbox is getting into the space; Slack has its own take; so does Cisco. A cadre of startups is trying to get a toe into the market.”

  • “Katie Burke, the chief people officer at HubSpot, said she does a Loom video for her team every Friday. ‘Sometimes it's updates, sometimes it's shoutouts, sometimes I do a deep dive on a business topic,’ she said. It's better than a meeting, she said, because it doesn't require everyone to be paying attention at the exact same moment.”

  • “Even after doing them for a while, Burke said she can't believe how many people actually watch her videos. And share them. And give feedback.” READ MORE

FINANCE

The business model of venture capital is to throw a lot of companies at the wall and see what sticks, but what about the companies that don’t stick? “A new fund, launched by VC and private-equity veterans Lauren Bonner and Arun Mittal, is looking to buy up those that aren’t so lucky. Their goal is to fund and improve the operations and profitability of these ‘abandoned’ companies, preparing them not for an initial public offering but, ideally, a sale to a strategic acquirer. ‘Companies that fall off the unicorn trajectory don’t have a lot of options,’ Ms. Bonner said. ‘We know that, because we’ve received midnight calls from founders.’”

  • “The new firm, called MBM Capital, is raising funds to buy venture-stage companies with real revenue and products but struggling to raise additional capital.”

  • “These companies—Ms. Bonner and Mr. Mittal call them ‘thoroughbreds’ or ‘workhorses’—likely aren’t growing as quickly as other startups, and they may have operational problems that need to be addressed.”

  • “‘A lot of companies just fail to hit that velocity, but that doesn’t mean they’re bad,’ Mr. Mittal said.” READ MORE

COMPENSATION

Ryan Caldbeck talks about the challenges of setting compensation for a founder/CEO: “Set it too high and you look piggish (or worse). Set it too low and you may not be able to stay in the role financially, or you are undercutting yourself. Maybe you should target lower than market to set a tone for the rest of the company — everyone should sacrifice to build something bigger, right? Should your co-founder, not the CEO, receive the same compensation? What does your comp say for the company’s culture in terms of being data-driven? In terms of being frugal? In terms of focusing on equity vs. salary vs. bonus? While most of the team won’t know your comp, some will, as will the board, and it will have an impact on those things.”

  • “Founders, including myself, often get through the first few years by paying themselves less than market, choosing instead to use the cash on the rest of the business.”

  • “While there are times when this is simply required, time and again I have seen it putting unnecessary stress on the Founder/CEO and thus on the rest of the company.”

  • “I did that for the first six years of being CEO, and to be blunt, I regret that choice. Because I was taking a below-market salary for most of my time as CEO, there were several years that I had to routinely dip into savings and sell investments in order to cover our family costs.”

  • “I felt financial stress on top of typical CEO stress. I believe this type of stress can sometimes lead to the CEO making more short-term decisions and can prevent them from taking big swings.” READ MORE

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TAXES

Here’s how the new global tax deal with a 15-percent minimum is expected to work: “That rate will apply to multinational corporations with annual revenues of more than $867 million. The idea is to discourage companies from being able to avoid paying taxes by finding havens with low rates. Companies that do park money in a country that is not part of the deal would be required to pay the difference between that nation’s rate and the 15 percent minimum rate to their home country.”

  • “Governments will apply the tax on a country-by-country basis, so that companies cannot lower their tax bill simply by seeking out tax havens and ‘blending their tax rates.’”

  • “Taxes have traditionally depended on where a company operates, but the deal will update rules for the 21st century and allow countries to levy taxes on some large and profitable companies based on where their goods and services are sold.”

  • “The agreement was a response to an attempt by European countries to impose digital services taxes on American technology giants such as Google and Facebook, which operate all over the world, even if they do not have a physical presence in every country.”

  • “The global pact reached a compromise that allows countries to impose an additional tax on some of the profits of about 100 of the world’s richest companies based on where their sales are.” READ MORE

POLICY

A Chamber of Commerce poll says small business owners support vaccine mandates: “The poll determined that 64 percent of small business owners back President Biden’s federal mandate for companies with at least 100 employees to require vaccination or weekly testing. An equal percentage approved of business-initiated vaccine requirements as well. Sixty percent of these business owners also said they approve of requiring proof of vaccination from their customers. Half of those surveyed said they expect to or are already requesting proof of vaccination from customers, an increase from 38 percent in June before the delta variant became the dominant strain. A higher percentage, 61 percent, said they are likely to or have required their employees to get their COVID-19 shots.” READ MORE

MARKETING

With inventory low and demand high, is there any reason to advertise? “Church & Dwight, the consumer-product company behind the Arm & Hammer and OxiClean brands, said Friday that it pulled back on third-quarter marketing for products most affected by the shortages, especially household products. The New Jersey-based company said it expects supply-availability issues to begin to abate in the first half of 2022 for most of its brands. Two of the largest players in online advertising, Facebook. and Snap, said recently that they expected a slowdown in revenue growth in the fourth quarter, due in part to macroeconomic factors such as supply-chain bottlenecks and labor shortages.”

  • “The retreat comes as the ad market has been booming, thanks in part to strong consumer confidence and the end to some restrictions intended to slow down the spread of Covid-19. The fourth quarter of the year is typically the most lucrative for media entities as brands and retailers rely heavily on the critical holiday shopping season.”

  • “‘It’s not wise to drive demand when shelves are bare,’ said Susan Cantor, chief executive officer of branding firm Sterling Brands.”

  • “Some digital publishers are planning for ad spending to shrink by at least 5 percent in the fourth quarter compared with their previous projections, according to media executives.” READ MORE

STARTUPS

Both Bill Gates and Mark Cuban have invested in Neutral Foods, a Portland startup: “Neutral sells milk that it says is carbon neutral, accomplished by investing in emissions reductions at dairies and buying offsets. The company was founded in 2019 by Matt Plitch, a former Nike executive. ... After getting early traction in New Seasons Markets and Metropolitan Market in Oregon and Washington, Neutral went into more than 170 western U.S. Whole Foods stores in August, with distribution to the upscale grocery chain’s 500-plus outlets nationwide set to begin next month.”

  • “Cuban called Neutral ‘a game-changer … that can feed us while protecting us.’” READ MORE

FOOD & BEVERAGE

With the pandemic has come the rise of the designer deli: “New York, of course, was once a checkerboard of Jewish neighborhoods, and every such enclave had one or more kosher delis upholding Orthodox dietary strictures in which meat and dairy must be kept separate and pork products are banned. By one count, New York had upward of 1,500 Jewish delis in the 1930s, which dwindled into the 10s in recent decades. The change was largely caused by demographics; the city’s Jewish population peaked at roughly 2 million circa 1950 and was half that by the early 1980s. The traditional delis were also undercut by changing attitudes toward their mainstays: fat, carbohydrates and salt.”

  • “‘People would always ask us, do you think there’s enough Jewish people who live in Greenpoint?’ Mr. Frankel recalled. Their reply: ‘That’s not necessarily who we’re building this for.’”

  • “Now, the clientele at lunch rush is ‘a wild mix of, of characters,’ he said. And they order more bacon than any other kind of meat.”

  • “When I brought up examples of designer delis in other cities, like Perly’s in Richmond, Va., he responded, ‘I mean, there’s amazing ones. I follow a ton of them on Instagram,’ including Courage Bagels in Los Angeles and Bagelsaurus in Cambridge, Mass.” READ MORE

THE 21 HATS DASHBOARD

What’s at stake for small businesses in the Build Back Better bill? This week, I talk to John Arensmeyer, founder and CEO of Small Business Majority, an advocacy group for entrepreneurs about the seemingly endless negotiations in the Senate over what could be the Biden administration’s most important piece of legislation. What’s in the bill that would help business owners? What’s in the bill that would hurt? What’s not in the current version that should be? And will the sausage-making ever end?

If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren