Continuing to set the corporate standard for generosity to employees, Kingston Technology Corp. has handed out $20 million in bonuses at a time when the memory-chip industry is hitting an all-time low.
The payouts--$10 million in both July and August to nearly 700 employees--is the second round of bonuses that Kingston founders David Sun and John Tu have bestowed on workers since selling 80% of the Fountain Valley memory-chip-products maker to Softbank Corp. of Japan for $1.5 billion in 1996.
Amid the recent wave of high-tech mergers, stock volatility and widespread layoffs, Kingston's willingness to distribute hefty bonuses--despite its own drop in sales--reflects a radical corporate philosophy, analysts said.
"This is the sort of good news you'd hope to see from time to time to offset the appearance of greed in the business world," said Raymond E. Miles, professor emeritus at the Haas School of Business at UC Berkeley. "Unfortunately, this is a totally unique story."
Sun and Tu set up a $100-million fund in 1996 for workers to share in sales proceeds. About $40 million was distributed in early 1997, with roughly $60 million set aside for future bonuses. Last year's bonus checks ranged from $2,000 for recent hires to six digits for some.
Kingston executives declined to state the range of the most recent bonuses, which were based on seniority, salary level and performance.
"Two years ago, we made a commitment to redistribute the wealth," said Gary MacDonald, senior vice president of sales and marketing at Kingston. "If you only take care of people during the good times, that's called generosity. But we didn't really want to promote this because it looks like self-serving publicity."
Other U.S. companies have helped their employees become wealthy, such as Microsoft Corp., which has spawned many millionaires in its ranks. But most often, these cases deal with stock-option programs.
Analysts note that privately held Kingston has felt the impact of plunging prices for semiconductors that hold data in PCs, the result of a market glut. Weaker-than-anticipated computer sales and the Asian economic crisis have fueled a slowdown in the chip industry.
Kingston and its shy founders gained national attention after the first round of bonuses were announced in 1996. Television news crews flocked to the building and receptionists handled more than 1,000 calls per hour.
Sun, 48, and Tu, 58, were uncomfortable with the attention. Since founding the company in 1988, they have maintained an unorthodox--but effective--attitude toward business. They never relied on venture capital, refused to sell stock, sealed deals with handshakes and rejected sterile offices in favor of toy-covered cubicles in the center of the firm's sales floor.
Before the generous bonuses began, the company had a minuscule turnover rate. Since then, a couple of dozen employees have left to start their own businesses or go back to school.