How to Cut Your Own Pay
Ramond Seaver, founder of 15-year-old Seatec, an engineering-design business based in Warrior, Ala., cuts his own compensation whenever his $15-million company goes through cyclical downturns or cash-flow crunches. His approach:
Keep overall income flexible. "My annual income consists of two features -- a salary that's quite low by corporate standards and a supplement that I earn only in profitable years." The supplement is equal to whatever net profits above $100,000 the company earns. (That $100,000 is Seaver's baseline estimate of the capital Seatec needs annually to keep funding its growth.)
"If it's clear the company isn't earning enough," the CEO says, "I just eliminate the supplement." And when that isn't sufficient, he lends his personal funds to the company instead of wiping out his subsistence salary; he supports the loan with a document that spells out the interest terms but leaves the payment schedule flexible.
Monitor quarterly trends. Seaver doesn't cut his bonus on the basis of a single unprofitable quarter. "But if we come out with two bad sets of quarterly results in a row, I automatically eliminate my bonus or dividend payment." He then waits for an upturn that lasts at least six months before raising his payout.
Seaver is philosophical about the process. "My wife and I own 100% of the company, so we see it as an extension of ourselves. When it makes money, we enjoy the benefits."
-- Jill Andresky Fraser