Holiday Bonus for Workers: $100 Million
Setting a staggering new standard for generosity to employees, the co-founders of an Orange County technology company unveiled a $100-million bonus package at the company’s holiday party Saturday night, and will soon begin giving workers checks for up to three times their annual salaries.
With payments averaging $75,000, the largess represents employees’ share of the $1.5-billion windfall received by David Sun and John Tu when they sold 80% of Kingston Technology Corp.--the world’s largest maker of computer memory products--to Softbank Corp. of Japan earlier this year.
Tu and Sun were by no means obligated to share the wealth. But in an age when employees are commonly treated as costs and Wall Street cheers executives nicknamed “Chainsaw Al,” the gesture is merely the most extreme example in a long tradition of generosity at Kingston.
“To share our success with everybody is the most joy we can have,” Sun said to hundreds of cheering employees and their families in a ballroom at the Anaheim Marriott.
Some fought back tears and others talked of buying houses, helping their parents--or simply saving their bonuses.
“This is beyond my wildest dreams. But everything they do blows me away,” said sales representative Brandi LaPlante. “I’m going to get a bigger car to hold my three kids.”
Tu and Sun said that about $60 million will be set aside for future bonuses to workers, but the rest will be doled out immediately. Depending on seniority and performance, most of the 523 employees of the Fountain Valley-based company will get one to three times their annual salaries, meaning $300,000 or more for some.
They say their employees are the reason the company sits atop the computer memory industry.
“They are the ones working hard day in, day out,” Tu said. “Our attitude toward our employees is, ‘You deserve this. You deserve more than this.’ ”
Other U.S. companies have certainly helped their employees become wealthy. Microsoft Corp. has spawned thousands of millionaires in its ranks. Levi Strauss & Co. this year offered its 37,000 workers an incentive program that could be worth $750 million if goals are met over the next five years.
But those cases and many others involve stock option programs that allow employees to buy their company’s stock at a discounted price and sell it later for a profit. Kingston is unique because employees are being given cash that Tu and Sun could have kept for themselves.
“I’ve never heard of anything like this,” said Jeffrey Pfeffer, a professor at Stanford University’s business school. “It is momentous, particularly because it is being done voluntarily.”
Kingston is not the first firm to discover that a family values approach can be a formula for success. Southwest Airlines, Hewlett-Packard and others have prospered by taking good care of employees.
“It’s how you look at your work force,” Pfeffer said. “When I look at you do I see a cost, or do I see you as the only thing that separates me from my competition?”
Saturday’s announcement ended the rumors whipping around Kingston since the Softbank deal was completed Sept. 5.
“It’s like being a kid on Christmas Eve,” said Ron Seide, a general manager at Kingston. “Except it’s been Christmas Eve around here since September.”
Sun and Tu promised that employees would share in the bounty as soon as the Softbank deal was announced. Tu playfully tossed out possibilities of paying off employees’ mortgages or setting up college funds for their children.
In the end, they opted to let their employees--from shipping workers who earn hourly wages to managers making six-figure salaries--decide. Still, Sun and Tu, who both believe in preparing for the worst, have ideas about how employees should use the money.
“They should pay off their debts,” Sun said. “I hope this money is going to make their lives more stable.”
Sun said he and Tu arrived at the $100-million figure shortly after the sale. There was no science involved. It just sounded like enough to give employees a substantial bonus, and set aside plenty for the future.
But the two founders and senior executives spent months devising a way to divide up the money. The result is a complicated formula based mainly on seniority and performance evaluations. “I don’t expect 100% of the employees to think it’s fair,” Sun said. “Everybody views things differently.”
Of course, Sun and Tu will have plenty left over for themselves. Forbes magazine estimated that each is worth about $900 million, making them among the nation’s 400 wealthiest individuals. Each is married with two children.
Partners for more than 15 years, Tu and Sun have remarkably different personalities. Tu, 55, is quiet, thoughtful and deliberate. Sun, 45, is boisterous, affable and sometimes rash. But the two men, who emigrated from Taiwan in the late 1970s, share deeply held values about how to run a company.
Tu was born in China, and says his mother taught him humility and compassion. “Don’t bring flowers to people who don’t need them,” she often told him. “Bring coal [for heating] to people who need it.”
When civil war erupted in China, Tu’s family fled to Taiwan, where his father was a film censor for the government, evaluating films from the mainland and rejecting those with communist themes.
Sun was born in Taiwan. His father left the family when he was 5, leaving Sun and his two younger sisters to be raised by their mother, a biology teacher. Sun, like Tu, says that many of his values come from his mother, but he was also shaped by bitter experiences early in his career.
He tells of his days as an engineer for Alpha Microsystems in Costa Mesa. After the company sold stock to the public for the first time, the chief executive proclaimed to employees, “Well, I finally made it.” An angry Sun says he thought, “What about me?”
Sun and Tu met in Orange County in 1981, and made their first fortunes when they sold a company they founded to AST Research in 1986 for $6 million. After losing much of their money in the 1987 stock market crash, they launched Kingston.
Their timing was perfect. The personal computer industry was exploding, and advances in software required more and more memory. Kingston became one of the fastest-growing companies in the country, and expects 1996 sales just shy of $2 billion.
Their management style was unconventional. They did most deals on handshakes, paid suppliers early, and set aside 5% of the profits for employee bonuses. They never borrowed money, resisted the temptation to sell stock, and paid cash for their headquarters.
They also eschewed fancy titles and offices, and to this day sit in low-walled cubicles in the center of the sales floor. That way, they say, they are always approachable, and there are no secrets.
“There are too many hidden agendas in other companies,” Tu said. “It’s much easier this way. Once people trust you, it’s very easy to manage.”
Turnover is less than 1% per year. Many workers say they would do anything for the founders, and in some ways they do--it’s a demanding place to work.
Minh Nguyen, 36, is the company’s shipping manager. Each day, he and 11 co-workers pack and ship 2,500 packages to companies nationwide on tight deadlines.
“I work from 9 a.m. until the job is done, usually from 8 to 9 at night,” Nguyen said. “If the job is not done on Friday, on Saturday we come in.”
Like many of the workers, Nguyen is surrounded by family. His wife, sister, brother-in-law, nephew and niece all work for the firm. Together, their bonuses will amount to a hefty chunk of cash.
Asked whether he might pocket the money and move on, Nguyen said, “Move on? If I want to transfer, I can talk to the boss. Oh, you mean another company. No. No. I’m so happy here.”