Bonus at Kingston in Line With Founders’ Philosophy

Employees at Kingston Technology Corp. were thrilled, overwhelmed and appreciative after learning that they would be the beneficiaries of an unprecedented, $100-million bonus package. But they were not surprised.

“It’s another classic example of their generosity,” said Keith Kline, 33, an account manager at Kingston. “We realize that this doesn’t happen in other places, but given the relationships John and David have with employees, it’s not beyond belief.”

Kline was referring to John Tu and David Sun, the co-founders of Kingston, a Fountain Valley-based company that has risen to dominance in the computer memory business while treating employees like family.

At the company’s holiday party on Saturday, Tu and Sun announced the bonus program to hundreds of cheering workers, most of whom soon will be receiving checks for amounts ranging from one to three times their annual salaries.

But while such news would likely produce audible gasps at most companies, many Kingston employees appeared to take the announcement in stride.

“For me, it’s no surprise because they are always so generous,” said Mike Chen, the director of manufacturing at Kingston. “We do not take it for granted, but that’s their philosophy.”

The bonus package, which experts say is unprecedented, stems from the $1.5 billion received by Tu and Sun when they sold 80% of their 9-year-old company to Softbank Corp. of Japan in September.

Tu said that about $60 million will be set aside for future bonuses to employees, and $40 million will be distributed before the end of the year according to a formula that weighs employees’ seniority and performance. With 523 employees, the average payment will be about $75,000, although some of Kingston’s top paid workers could collect $300,000 or more.

The bonus package is by far the largest in Kingston history, and comes out of money Sun and Tu could have kept for themselves. But the bonuses are part of a tradition of generosity at the company, where 5% of the profits are divided among employees every quarter.

The bonuses are just one piece of a broader management approach at Kingston. Employees work hard and long in difficult jobs, ranging from shipping to manufacturing to sales. But in return, they are paid above-average salaries, enjoy catered lunches every Friday, and carry a promise from Sun and Tu that they will be taken care of no matter what happens to Kingston.

Tu said Sunday that dozens of employees, some of whom learned about the bonuses during meetings on Friday, approached him at the holiday party to express their gratitude.

“It just confirms for me that what we do is right,” Tu said. “We’re always trying to tell people you can be successful in big business, and yet be honest and good and down to earth. Hopefully, more companies will think this way.”

The bonuses employees receive will be taxed just as regular paychecks would, meaning many Kingston workers could be boosted into a higher tax bracket this year. Sun said the company plans to hold meetings with employees seeking advice on what to do with their cash. But on Saturday, many were already making plans.

“I’ll be putting it toward a home, and maybe one special toy,” Kline said.

Others said their plans would be influenced by the lessons they have learned from Sun and Tu, lessons that often apply outside the office.

“I used to be a pretty selfish kid,” said Ray Wang, 25, a product marketing manager. “But John has taught me that family is important and you should make them a part of your life. I still live with my parents, and I started thinking about what I could do for them.”

One option, he said, would be to help reduce the mortgage on their home in Torrance.

Chen, who was one of the first employees to join Kingston when the privately held company was formed in 1987, said he may give some of his bonus to charities.

“My standard of living is very low,” Chen said. “I still go to Sizzler with my wife and use coupons. I don’t want to go to Hawaii or buy a fancy car.”

Ostentation is shunned at Kingston, where Sun and Tu still sit in cubicles in the middle of the company’s sales floor. Sun still lives in the same Irvine house he’s owned since he founded Kingston, even though his personal fortune is now worth an estimated $900 million.

“If your boss has a fancy office or drives an expensive car, all the employees will be influenced by it,” Chen said. “David still drives a Bronco.”