The profit-sharing plan is bearing the brunt of that. Banks doesn't anticipate being able to make any new contributions in the near future. The money in the retirement plan continues to grow, however. Most Metropolitan executives also continue to build long-term rewards through the performance of their phantom stock shares, whose value is tied to the company's overall performance.
Executives and other employees also receive annual cash bonuses, set at levels appropriate for the current austerity. Banks doesn't, however. "The way our bonuses are set up, I don't receive anything till we hit our top numbers -- which we haven't made yet."
Banks has found a way to improve his employees' compensation despite his current financial restrictions. Last year he created a 401(k) plan that he merged with a 401(k) that already existed at one of the companies he had recently acquired. The plan's low administrative cost made it simple for Metropolitan's bankers to live with, just as long as Banks promised not to match employee contributions until he met his various operating goals. Twenty-five percent of his employees joined -- not bad for the first year -- and now defer about $2,000 worth of salary each month.
What's the payoff from all the personal attention to compensation matters? A work force that, in Banks's eyes, "understands that we're all a family working toward a common goal, toward rewards we're all going to share." That may sound like California dreaming. But Metropolitan's record of success is pure reality.
THE TAKE AT THE TOP
How CEOs set their own compensation
If there are no easy answers in executive compensation, that's particularly true when company owners have to decide how much to take out of their businesses for themselves, and when. Take out too much too soon and they risk crippling their growing businesses; yet if they fail to diversify their finances beyond the business as soon as that's feasible, they risk sacrificing their family's financial future to the company. What's a CEO to do?
"Since there's no real formula to rely on, it's a matter of conscience," says Joe Schulman, president of Sentry Chemical Co., an Atlanta manufacturer of cleaning compounds with annual sales of about $7 million. "I develop a number based on my productivity and the company's profitability, and then ask myself what people in my shop would say if they knew what I earned." Among the companies surveyed, the average base salary for CEOs was nearly $80,000. The bigger the company, the likelier it was that the chief executive took home a good bit more: CEOs at companies with sales of $1 million to $4.9 million had an average total compensation of $107,461; when sales topped $10 million, the CEO's total pay averaged a much more generous $194,089.
Those numbers sound positively utopian to many struggling business owners who continue to make financial sacrifices long after their companies pass beyond the initial, precarious phase of operations. "We live moderately and have few financial needs," says Gregory Turner, whose Saginaw, Mich., business, Turner Business Forms Inc., is eight years old. Although his revenues top $1 million annually, Turner still takes home a salary that's a small fraction of the survey average. "I'm not one for the yachts and big cars. I tell my wife the equity we're building for ourselves in the business is the big thing."
Generally speaking, it's more the size of one's ambitions than the size of one's company that determines how much an owner takes out of the business. "I'm 41, and I have virtually no assets outside of this company," admits Mike Slataper, whose Mansfield, Tex., construction business, Ramtech Modular Design Inc., has grown to $12.8 million in sales. "That's because I have goals that go far beyond our being a $15-million company. And you're not going to grow like that if you're raping your business of its capital." Nor are you going to survive hard times and achieve those larger ambitions, most CEOs agree, if you're not willing to cut your own compensation when it's in the company's best interests. "In hard times, I've cut my salary down to grocery money," says A. J. Adolph, whose Automotive Casualty Insurance Co., in Kenner, La., now boasts double-digit profit margins and $50 million in sales. "Hell, I've sold my car when times were bad."
Not surprisingly, those kinds of sacrifices instill a zest for enjoying the good times when entrepreneurs think their businesses can finally support them. "For the first 20 years, I worked 18 hours a day, seven days a week, and didn't take a big salary because I was building up inventory, buying machinery, and accumulating retained earnings. But now my son and son-in-law can earn more than $240,000 a year and I earn far more than that," says Leonard Silverstein, founder of $5-million Terrace Paper Co., of Cicero, Ill. "If I were the head of General Motors, I'd have to answer to my shareholders. But I work for myself and my family. When I think I have enough money retained in the business, it's stupid not to take it out."
Most of the survey respondents are still committed to sharing the rewards of success with their top executives. Respondents paid an average of $65,497 in base salary and $19,749 in bonuses (when paid) to their COOs. Chief sales officers averaged $54,794 in salary and another $15,550 in bonuses for those who got them. In fact, quite a few CEOs were quicker to reward their executives than themselves. Robert A. Funk of Express Services Temporary & Permanent Personnel, in Oklahoma City, sounds almost wistful as he comments, "Our bonus system has always been one of our company's biggest strengths in attracting and retaining top people. And once the company finally reaches a certain level of profitability, my partner and I are definitely going to start taking bonuses ourselves."
