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The unexpected backlash when a startup CEO slashed his own salary to pay staff double

Gravity Payments boss Dan Price was lauded as a hero to other founders – but the story didn’t end there.

Gravity Payments CEO Dan Price
Gravity Payments CEO Dan Price
Image: YouTube

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.

Gravity4 Source: YouTube

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.

Gravity1

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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About the author:

Peter Bodkin  / Editor, Fora

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