Jay Goltz at The New York Times has his answer to this question. Actually, there is a simple answer.
I think business owners should pay themselves whatever is left – whatever is left, that is, after everyone and everything else has been paid and after money for growth and paying down debt has been factored in.
Among the factors that should not be considered when determining what an owner should be paid are how hard the owner works, what responsibilities the owner fulfills at the business, how long the owner has been running the business, what owners of similar businesses make, what the owner’s employees make – and especially not what some outsider might consider to be fair.
Entrepreneurship is not a job. Employees should be paid what they are worth, depending on market conditions.
If a company does particularly well, it probably makes sense for the employees to share the benefit through some kind of bonus plan.
But if a company is not doing well, the owner may end up making less than some employees, or even losing money.
There is no “fair” when it comes to the owner’s salary, just fear that it won’t be there. You make what you earn.
Photo by Kinsey/photofunia.
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