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WHEN GRAVITY PAYMENTS founder Dan Price decided to slash his own million-dollar salary and double the earnings of his lowest-paid staff, he was lauded as an example to bosses around the world.
But three months later the CEO of the Seattle-based startup is facing a customer backlash, staff quitting in protest and a court case from his own brother in the wake of the maverick decision.
In April, Price and his company made international headlines when he decided to cut his own $1 million salary by 90% while boosting the minimum wage at his firm to $70,000.
It also brought him praise from across the globe for being a leader for other startups founders when it came to sharing their wealth.
At the time, Price said he wanted to do something to solve the issue of inequality in the US – to find a “capitalist solution to a large social problem”.
I was happy to come up with something to try … but I might be crazy,” he told MSNBC at the time.
Unfair raises and a lawsuit
While the move was going to be phased in over three years, starting from a $50,000 floor this year, it appears that wasn’t enough to keep the Gravity Payments boat steady.
The New York Times reported some customers cancelled their business with the company because of Price’s “political statement”, while others went elsewhere expecting extra staff costs to be passed on in higher fees.
Some pundits also questioned why the CEO was paying himself $1 million in the first place when the fledgling company was only expected to turn a profit of $2.2 million that year.
Meanwhile two of the startup’s best employees quit, citing the pay rises as unreasonable when it meant some new staff had their earnings doubled while long-standing workers got nothing.
He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” one of the pair, Maisey McMaster, told the Times.
Price previously said he had done a risk analysis of the change and the company’s clients were “really proud” of what he was doing.
In another blow after the pay-rise announcement, Price’s brother and company co-founder Lucas Price sued the Gravity Payments CEO for violating his rights as a minority shareholder.
Lucas Price’s lawyer told the Seattle Times the case was “an aggregation of events over the course of years” and didn’t directly relate to the pay announcement.
However Price said he stood by the plan, adding that he “came up with the best solution (he) could”.
There’s no perfect way to do this and no way to handle complex workplace issues that doesn’t have any downsides or trade-offs,” he told the New York Times.
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there is just no pleasing some people
And you are not pleased because they are not pleased.
I can understand though how employees there from the beginning could be put out.
It’s a good intention with unforeseen effects.
Maybe there’s a lesson in it – maybe raising the bar for everyone but raising it a bit more for those at the lower end could have avoided the backlash?
a cleaner on 70k while highly skilled staff their from the beginning on 80k. that would make anyone feel unappreciated
he should have given big wage increases to the lower paid and cut his own without making a song and dance about it. trying to show he’s not like all the other greedy high earners but he was greedy for recognition instead
If this story is reported accurately (I can’t interview Price myself) and Price only raised the salaries of those employees on the lowest pay and didn’t give corresponding raises or benefits to all pay grades……he was very naive. It also shows a serious lack of thinking things through. Bad feeling about certain grades getting raises and others not is one of the most obvious and established reasons for bad morale in a workplace.
Better clarify my comment. I assumed by ‘inequality’ Price meant the ENORMOUS difference between CEO and senior management pay/benefits and the lowest pay grade. I didn’t mean that this isn’t a very serious problem, just that he should have anticipated some of the problems that did occur, because they’re more or less universal human reactions.
Maybe big business and giant corporations are afraid that he might set a precedent. I for one salute this mans conscionable decision to try and achieve fairness and equity in the workplace.
I applaud his good intentions but he definitely should have done a deeper analysis of the possible outcomes. As mentioned above, there is no pleasing some people and others are going to feel put out regardless.
Maybe if he had of stuck to reducing his own salary and creating a better staff bonus system for workers, he might have had a win…….maybe!
This was always going to cause issues. Imagine you have grafted hard for 6 -8 years to get your salary from say 35k to 70k and then suddenly…everybody is getting 70k. Thats gonna leave a sour taste.
If you’re greedy*
Maybe so. but I’d love to know if the 2 super employees who left got better elsewhere??
I assume they were on more than $70K and were forced to take a pay cut down to $70K inline with their CEO, in which case it’s not surprising that they’d leave since their market value is higher than that.
Remember the CEO is also a shareholder in the company so he has a few mill on paper to fall back on.
Bit like here. Give a euro an hour pay rise to a cleaner and everyone wants a ten percent rise. The only people who want to end inequality are those at the bottom.
While I applaud the man’s altruism, I would have expected him to at least discuss the proposal with fellow board members, of which I presume his brother is one. The decision to increase some staff members salaries and not others was guaranteed to cause resentment and a recipe for disaster A well intentioned fool, methinks.
no differentiation in pay, regardless of performance or contribution? Sounds like something a union or a communist would come up with.
Or maybe a good human being or Christian ??? Or is that only for other people
It makes me wonder if capitalism is a disease. isn’t it morally better to improve wages for lower paid workers. than make wealthy people even wealthier
Whingebags! Some people just need slaps across the face with a big shut the f up!
Good idea, but in fairness you can’t pay people who do a little the same as those who do a lot. Otherwise those who do a lot won’t be bothered any more. Performance based raises would have been a better diea
Salary bump is great if you’re the cleaner. Less so if you’re a programmer / engineer / CFO.
Im pretty sure office cleaners for most corporate offices are outside contractors working for the building management rather than the businesses themselves. So there will be no cleaners getting bumped up to 70 g a year me thinks
he shouldn’t have gone on about it
Maisey McMaster…..worra name
The old cliché is true. No good deed goes unpunished.
This was a really stupid idea. It’s great from the point of view of the ones that just started with him or are low skilled or don’t contribute much to the company. But for the high skilled people who may still have large education debts (as is the norm for US college graduates) and the people who worked for him for years it’s a complete slap in the face. It’s lovely to think we should all be paid the same but the reality is if you were being paid as much as someone who did half your work or couldn’t even do your job you would feel incredibly devalued and unfairly rewarded.
You are dammed if you do and dammed if you don’t.
“This startup CEO slashed his salary. You’ll never guess what happened next!”
People are just S**t aren’t they? Dinner they get those robots built the better!
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