CEO takes pay cut so all workers can earn $70,000
<p>Matt Kim an accountant with Gravity Payments, a credit card payment processor based in Seattle, talks on the phone as he works at his desk Wednesday.</p>
(AP) A Nampa Christian High School graduate turned successful Seattle CEO who announced that he's giving himself a drastic pay cut to help cover the cost of big raises for his employees didn't just make those workers happy.
He has already gained new customers, too.
"We've definitely gained a handful of customers in the last day or two," said Stefan Bennett, a customer relations manager at Gravity Payments, a credit card payment processing firm. "We're showing people you can run a good company, and you can pay people fairly, and it can be profitable."
Dan Price, chief executive of the company, stunned his 100-plus workers on Monday when he told them he was cutting his roughly $1 million salary to $70,000 and using company profits to ensure that everyone there would earn at least that much within three years.
Gravity Payments is a credit card payment processing company with a staff of 120 people. The average salary there now is $48,000. Seventy employees will see pay raises, and 30 will double their salaries, a company spokesman told the paper.
Price - a graduate of Nampa Christian High School - said the move was inspired by an article he read about happiness. The article showed that extra money makes a big difference in the lives of people who make less than $70,000.
Researchers Angus Deaton and Daniel Kahneman found that emotional well-being rises with income only to the point of $75,000 a year — income above that level doesn’t necessarily buy happiness, but income below that point may deprive people from happiness.
For some workers, the increase will more than double their pay. One 21-year-old mother said she'll buy a house.
At a time of increasing anger nationally over the enormous gap between the pay of top executives and their employees, the announcement received immense attention. But corporate governance professor David Larcker of the Stanford University Graduate School of Business said it's unclear if Price's unusual gesture will start a trend.
"It's an alternative way to think about a tough problem, and I give these guys a lot of credit for laying it out there," Larcker said. "Whether this would scale to a bigger organization, it's hard to know. But it's clever, it's interesting and it's fun to think about."
Washington state already has the nation's highest minimum wage at $9.47 an hour, and earlier this month Seattle's minimum wage law went into effect. It will eventually raise base hourly pay to $15.
Labor unions and workers in the Seattle area on Wednesday joined national protests for better pay. Drivers for Uber and Lyft - the app-based car-hailing services - gathered in Seattle, while airport workers rallied at Seattle-Tacoma International Airport. In Seattle, police arrested 21 demonstrators who opted for civil disobedience to dramatize their point, refusing to move out of an intersection at the conclusion of their march.
Gravity's CEO launched the company from his dorm room at Seattle Pacific University when he was just 19. He has long taken a progressive approach that included adopting a policy allowing his workers to take unlimited paid vacation after their first year.
"I think this is just what everyone deserves," Price told workers in a video of Monday's announcement released by the company.
But he also acknowledged it won't be easy: The increased pay will eat into at least half the company's profits, he said, and he has no plans to simply raise rates on clients.
"It's up to us to find a way to make it work," he said.
Bennett, 28, went to college with Price and has worked for Gravity since graduation. He said he was already happy to work for a company that treats its employees and customers well in what he otherwise considers a predatory industry. For him, the raise will amount to about $10,000.
"I don't care as much about the money," he said. "But if I look at my colleagues, and what they talk about on a day-to-day basis and what their concerns are - just looking at their faces when Dan announced the pay increase, it was pretty phenomenal."
The Idaho Press-Tribune contributed to this story.