In April 1999, Tim Rudolph left the Stanford Graduate School of Business to become the founder and CEO of IPO.com, a securities brokerage firm specializing in helping young companies use the Internet to raise money from the public. IPO.com went public on March 2, 2000. On September 5, 2000, Rudolph personally sold one million shares of stock for $75 million. He used $10 million of the proceeds to buy a large house in Atherton, California, an easy commute to the company’s Silicon Valley offices. Rudolph still owns another four million shares.
IPO.com employs thirty senior computer programmers who are paid a starting salary of $125,000 and given stock options potentially worth millions. The company also employs five janitors who empty the trash, clean the latrines, and vacuum the senior programmers’ work areas. These janitors are paid approximately $15,000 a year. Due to the astronomical cost of living in Silicon Valley, several janitors with children have second jobs and rent out space in their one-bedroom apartments to make additional money to support their families. Four of the company’s janitors are non-English-speaking immigrants from Mexico who are desperate for employment and, as a result, are willing to work for the low salary.
Although there is a large pool of unskilled workers willing to work as janitors for $15,000 a year, the market for skilled programmers is so tight that IPO.com has had to institute special incentives to keep the programmers happy. Most recently, the senior programmer was given a Hummer, the civilian version of the U.S. Army’s Humvee vehicle, to celebrate the completion of an important piece of code.
What ethical and business considerations should a corporation and its CEO consider when setting the salaries for the different types of workers it employs?