Seattle CEO Praised for Raising Employees' Salaries to $70K Now Says He's Struggling to Stay Open
The CEO of a Seattle-based credit card processing company who promised employees an automatic salary of $70,000 is now renting out his house to try and keep the company afloat.
Dan Price, 31, CEO of Gravity Payments, garnered largely positive press earlier this year for his attempt to address income inequality by giving his employees a minimum annual salary of $70,000, but recently told The New York Times, "I'm renting out my house right now to try make ends meet myself."
Price slashed his own million dollar salary and benefits package down to a base pay of $70,000 to make the company's automatic pay raises spread out over three years work.
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The Christian Post covered Gravity Payments' story in April that featured comments from Jamie June, a staff member in the marketing department. Addressing Price's motivation and thinking, June described Price as "an incredible person."
"Dan is just an incredible man in general. He has an amazing moral compass. And so that's not only with his employees but the customers," June said.
Price, who comes from a conservative Christian upbringing, has admitted to now not being as religious, but said faith still plays a role in his life.
Roger Reynolds, co-owner at a wealth management company, told the Times that he disagreed with Price's decision and admitted to having "heated discussions" with the CEO. "I think he's trying to bring in some political and aspirational beliefs into the compensation structure of the workplace."
Two of Price's most essential employees have already quit, citing unfairness in the new pay structure. Maisey McMaster, 26, a former financial manager for the company, was initially on board but days later she was already questioning the decision.
"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," said McMaster. She came to later favor a more incentive-based pay structure, with additional compensation tied to experience.
Following the announcement she tried, unsuccessfully, to air her grievances with the company's CEO.
"He treated me as if I was being selfish and only thinking about myself," she said. "That really hurt me. I was talking about not only me, but about everyone in my position."
Still others in the company were naturally overjoyed with the decision and thousands of resumes flooded the organization. José Garcia, who manages an equipment team, was able to use the raise to move into the city and replace his worn tires on his vehicle. Other employees have undoubtedly been able to make improvements to their lives and living situation.
The CEO's older brother, Lucas, who holds 30 percent ownership in the company, is taking Price to court over loss of revenue. Lucas wants to be bought out from ownership in his shares but currently Price does not have enough capital to make that happen. The sibling conflict in the company predated the pay raises, but the salary hike has only intensified some of the conflict.
In an interview with CP, Jordan Ballor, a research fellow at the Acton Institute and author of Get Your Hands Dirty: Essays in Christian Social Thought, points out the noble nature of Price's effort but elaborates on the unintended consequences of the salary increases.
"The issue at the heart of Price's attempt to recalibrate the salaries for his employees is just compensation, or distributive justice, an idea that goes all the way back to Aristotle," said Ballor.
"The idea here is that every individual involved in an enterprise or an institutional endeavor is due some proportional part of the profits or proceeds. One of the reasons that Price's salary floor is having the effects it has thus far," he added, "is that it really only addresses the compensation of the lowest level of pay without proportional increases across the company."
Ballor told CP he thinks Price's efforts are "quite noble," especially his concern for a "middle-class living wage" for everybody who works for the company.
"But some of the unintended consequences of his solution thus far seem to be decreased motivation and morale among employees at higher levels of responsibility, authority, and achievement," declared Ballor.
"The challenge of just compensation is one that all businesses have to deal with, and Price's attempts are just one avenue that businesses have explored. Profit-sharing plans, stock-options, and performance-based bonuses are other ways that corporate executives have tried to address the calculus of justly compensating performance based on merit as well as needing at the company."
Ballor praised Price's efforts for being concerned about those struggling to make ends meet within his company, but added, "One thing Price is likely to learn is that a preferential concern for the poor, or the lowest-paid members of a firm, ought not come at the expense of just compensation for others as well."
In his interview with the Times, Price noted there are other options for companies to address income inequality, but argued his approach is "the best solution" he could come up with.
