Airbnb co-founder Brian Chesky, Ralph Lauren, and Lyft co-founder Logan Green are among the many entrepreneurs who have chosen to forgo their salaries for a time as their companies struggle to survive the Covid-19 pandemic and their employees face layoffs and furloughs. We can all learn from them.
Imagine for a moment that you're a hugely successful entrepreneur. You've risked your financial security and worked a crazy schedule for years to get your unique idea to the marketplace. And you succeeded. Your startup is now a household name, you're called on for keynotes and TV appearances, and your business has made you very wealthy.
But now that you've made it to the top, the global pandemic has slashed your company's revenue. To stay in business, you'll have to make deep cuts to your budget and lay off or furlough employees. So what do you do about your own compensation? Many entrepreneurs might decide that, after all their sacrifices and hard work, they should take whatever wealth they can get from a startup that may or may not survive the pandemic. But some have taken the opposite approach, voluntarily giving back their salaries for months or even a year to help their companies and their employees.
The personal finance site GOBankingRates compiled a list of 48 CEOs of high-profile American businesses who have chosen to reduce or completely give up their salaries because the global pandemic has forced their companies to dismiss employees. Many of these are long-established names such as Hilton and GE, but a lot of them are startups still led by their founders. You can find the full list here. These are some of the most famous founders giving up their salaries.
1. Airbnb co-founders Brian Chesky, Joe Gebbia, and Nathan Blecharczyk
This was supposed to be the year that Airbnb went public, but then the coronavirus arrived and the travel industry was especially hard hit. The company had to lay off 25 percent of its employees, about 1,900 people. The announcement was made this week in a letter from Chesky, who is CEO. That letter has been widely praised for being straightforward, transparent, and sensitive. More concretely, Airbnb is giving laid-off workers 12 weeks' salary and it's paying for their health insurance for a year (through 2020 for non-U.S. employees).
To help cover the cost of these generous layoff terms at a time when revenue is dramatically down, Airbnb has raised $2 billion in capital. It's cutting all marketing expenses. And the company's three founders are giving up their salaries for the next six months, with other top execs getting a 50 percent pay cut.
2. Ralph Lauren
Retail, especially luxury fashion, has suffered business losses during the pandemic, with most brick-and-mortar stores closed because of social distancing orders. Early last month, Ralph Lauren Corporation announced that with most of its store locations closed, it would furlough employees but continue to provide health insurance and other benefits.
As for Ralph Lauren the designer, he announced he would give up both his 2020 bonus and fiscal 2021 salary, estimated to have totaled about $11 million last year. Other Ralph Lauren executives will have their salaries reduced. After Lauren's announcement, some fashion icons such as Michael Kors and Donatella Versace followed his move by also announcing they were giving up their salaries.
3. Lyft co-founders Logan Green and John Zimmer
With demand plummeting, Lyft announced this week that it would lay off 982 employees, about 17 percent of its full-time work force. It will also furlough another 288 employees and reduce salaries for most of the rest. Even before that announcement, the company's co-founders had already pledged to donate their salaries through June to a fund for helping drivers.
Critics note that for most CEOs, giving up a base salary is more a symbolic gesture than an actual one, since most are paid largely in stock and bonuses. Marriott, for instance, has been criticized even though CEO Arne Sorenson gave up his base salary for the rest of 2020. That's because his 2019 base salary was $1.3 million, but his total compensation was well over $13 million.
Even if it is symbolic, giving up part of your compensation is a gesture worth making. If your company has made you rich, or even comfortably well off, you can't really know what life is like for your employees who live from paycheck to paycheck or must face a disaster like the pandemic with a near-empty bank account. But if you give up all or part of your salary and treat laid-off employees as fairly as you can, you're at least saying that you care.