September 2, 2014

Profit Sharing Surprise: Lenovo CEO Shares Bonus with Employees

Yang Yuanqing - profit sharing

Chinese computer maker Lenovo announced that its CEO, Yang Yuanqing, will share $3+ million of his personal bonus with employees. This is the second year he has done that.

About 10,000 manufacturing employees will each get a payment of around $325. Bloomberg News points out the amount is almost equal to a month’s pay for a typical city worker in China.

Mr. Yang (pictured) won’t go hungry, however. Last year he was paid $14.6 million.  He’ll have plenty of other non-bonus compensation.

Yang appears to be bringing results for Lenovo.  Lenovo has taken over the top PC manufacturer spot, with sales topping $34 billion.  He’s also led the company to become a smartphone maker.  Lenovo is also rumored to be considering a buyout of BlackBerry, which put itself up for sale last month.

Some observers point out his motives are not completely altruistic – or the payment wouldn’t have been announced so publicly.

Still, the move is remarkable in an age when CEOs get multimillion dollar bonuses even when their companies post losses — or worse, as they are headed out the door after being fired.

Perhaps Mr. Yang simply knows a thing or two about employee motivation.  The reality is, he stands to make a lot more later if employees feel a part of the company’s success.  Giving up his bonus today is a brilliant investment in the future — Lenovo’s, employees, and his own.  It builds good will and a desire to do more among employees who see tangible rewards aligned with the company’s successes.

Small Business Owners Know Why He Did It

It’s fairly common for small businesses to share profits — even though they do not have to.

According to the National Center for Employee Ownership (NCEO), small business owners implement profit sharing for a number of reasons:

  • To attract and retain good employees.
  • To make the business perform better. (“Several reliable studies indicate that, on average, employee-owned firms perform substantially better than non-employee owned firms when ownership is combined with employee participation in decisions affecting their work,” the NCEO site points out.)
  • To buy out an owner. (It can be hard to sell a business, so one way to get value out of the business is to “sell” it to employees.)
  • To raise capital.
  • For tax benefits.
  • Because small business owners believe it’s the right thing to do. (For intangible moral and spiritual rewards.)

Running a successful business always rests on an interrelated web of benefits for all involved:  the business itself, owners, and employees.   There has to be a benefit for every constituency.  In other words, when you share profits, there are reasons it helps the business, reasons it helps the owners/shareholders, and reasons it helps employees.

Does it help Yang and Lenovo? Of course it does.  But don’t overlook the benefits shared by all involved.

Some entrepreneurs and small business owners understand this instinctively.  To them, the Lenovo’s chief’s motives will seem perfectly aligned.

CC photo by Natalie Behring, World Economic Forum

14 Comments ▼
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Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

14 Reactions

  1. Even though Yang’s rolling in pools of money and therefore probably won’t feel the loss of $3+ million, it’s a really generous thing for him to do. Some people wouldn’t do it, wouldn’t even occur for them to. I guess they’re under no obligation to. Either way, it’s a thoughtful gesture on Yang’s part, especially as it’s not the first time he’s done it.

    • I agree, Ebele, that there are many executives who would not do it.

      But interestingly, when you run a small business, if you give employees bonuses, stock or an ownership in the company, it’s like it’s coming out of your pocket. Not all small business owners do it, either, but a surprising number do offer extras like that to their employees.

      - Anita

      • Yes I can imagine with a small business, it’s indeed like it’s coming out of their own pockets. In a way, that’s even more generous because small businesses that choose to give bonuses are giving from a cup that’s not full yet.

      • Anita,

        I witnessed this kind of generous gesture by a small business owner in Sopron, Hungary. I was doing a school project for about three months and before X-mas, the owner of the company gave the employees a holiday gift (an extra paycheck). The company had been profitable every year since Hungary became a free country in 1989.

  2. I like that he chose to give his money away to his employees but he cannot really prevent a negative reaction from the public if he announced a supposed-to-be-kept-private action. People will not help but wonder about his motives. But then again, he may just be trying to set a good example. Nevertheless, we must congratulate him for thinking more about his employees and less of himself.

  3. Wow! Such a move! I wish I had boss like that!!!

  4. Anita,

    Nice, smart move.

    Raised employees’ morale, getting buzzed, gained reputation and popularity – all win-win arrangements. Again, a smart move :)

  5. Anita,
    Great post! Compare this with some CEOs who have been much less generous. While Yang can certainly afford it, there are certainly small business owners much less affluent who are still putting the heads of some major corporations to shame.

  6. Very refreshing to see. Now if only American CEOs would get the hint that happy workers are productive workers. Keep you bagel Wednesdays and company outings. American workers need more income.

  7. An ideal CEO I must say. If any CEO out there would like a little respect, this is a good way to do it. Making your workers happy makes them work more hard and bring in more profit to your company. As this is kind of a gift to the employees; will there be any tax deduction on this?

  8. Wow, what a generous boss. Giving bonuses is the way to keep employees happy and a happy workforce will translate to higher productivity.

  9. We’ll probably see more of this kind of thing happening. The financial sector and CEOs specifically have taken a lot of heat for the often outrageous salaries and bonuses they get. This is very encouraging.

  10. We need more bosses like this, Kudos to him.

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